Monthly ETF Allocation Ideas - June 2020

Montag, 08. Juni 2020

Cross Asset Investment Strategy

The great market detachment from reality

  • We observe a dichotomy between market hopes and economic reality. We believe investors should stay alert as current market levels are still pricing in a ‘too rosy too soon’ endgame.
  • Now is a time to remain cautious: don’t chase the bulls, but gradually play investment themes better positioned towards a slow road to recovery. 
  • While we maintain our strategic preference for risky assets, we are convinced it is tactically safer to stay in the IG credit space, as a relapse in equities is due.  


Monthly convictions


Fixed Income: Positive on IG credit, constructive on US and Euro peripheral debts

  • We believe it is tactically safer to be invested in IG credit, in terms of risky asset classes, but investors should take a cautious stance and maintain sufficient liquidity. Over the past month, we have seen a gradual improvement in market conditions, but we are still not back to normal.
  • On credit, the focus on quality is key. We continue to favour EUR IG and US IG (we recently became more positive on this segment) that remain well supported by CB actions. 


Euro Investment Grade Corporate

EUR IG should benefit from the current normalisation environment and the ECB’s large liquidity backstop. In addition, most European companies entered the crisis with low leverage and comfortable cash positions while banks have high capital ratios.                                                                                                          

  0.16% OGC*

  0.05% OGC*

US Investment Grade Corporate

Investment Grade spreads have already tightened and markets have absorbed record issuance of corporate bonds, supported by continued QE. However attractive valuations offer compelling returns prospects over the next one to two years.

  0.16% OGC*

  0.05% OGC*


  • Globally, we have a neutral stance on duration, as we believe central banks will aim to keep the cost of public debt low to support governments' fiscal needs, leading range-bound movement in for yields. We maintain our constructive view on US duration and our positive stance on Euro peripheral debt. 


US Government Bonds

US Treasuries demand remains strong, supported by QE programmes and foreign inflows. The new issuance programme approved by the US congress to add fiscal measures, includes long-dated bonds and will bring more duration to be absorbed by the market. Therefore we prefer short-to-medium term segments.                                                                                                          

  0.14% OGC*

Euro Peripheral Government Bonds

We remain positive on Euro peripheral debt, we are more cautious but still constructive on Italy (strong investor appetite as €22 Bn raised recently through BTPs). Concerns about increased debt burden are balanced by Franco-German proposal for a form of ‘recovery fund’ while ECB actions are helping to put a ceiling on yields and spread volatility. 

  0.14% OGC*


Gold: an efficient hedge to protect portfolios

  • We are still positive on gold and continue to view this asset as an appropriate hedge to limit the impact of market uncertainty and to protect portfolios.


Precious metals: Gold

Gold remains the great winner in the current market turmoil. It benefits simultaneously from economic uncertainty, increasing government deficits and central banks QE purchase programmes that provide abundant liquidity in the financial system.

  0.15% TER*


Low visibility of earnings calls for caution

  • Investors have to navigate with exceptionally low forward visibility in an environment with potentially a wide range of outcomes. 
  • Therefore, we urge caution and call to maintain a disciplined process, with a focus on quality and with appropriate liquidity levels.   


European Equities

Opportunities exist; we recommend that investors seek exposures to attractive stocks in the defensive sectors on the one end and non-disrupted, discounted cyclical sectors on the other. In addition, identifying some structural winners in key accelerating trends, such as e-commerce, will be valuable in generating long-term returns.                                                                                                          

  0.35% OGC* 

  0.35% OGC* 

US Equities

In terms of convictions, we believe the winners will continue to win. We think investors should focus on sector leaders with sustainable businesses in an ESG integrated approach. Sustainable companies with market-leading positions win when market conditions are tough.

  0.18% OGC*

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