Monthly ETF Allocation Ideas - July & August 2020
Mittwoch, 08. Juli 2020
Cross Asset Investment Strategy
The bumpy road to a “day after” renaissance
- Overall, the data is not pretty but the general idea is that economic freeze is almost over and that it’s time to look forward.
- We can’t ignore any “day after” directions, but we must also exercise caution: don’t move from depression to euphoria, but from uncertainty to navigating a careful path forward.
- At portfolio level, maintain a balanced risk exposure, play the rotation toward value/cyclical stocks and stay positive in the credit space which is benefitting from fiscal and monetary measures.
Fixed Income: Positive on credit, constructive on US duration & breakeven inflation
- Ultra-accommodative CBs and strong fiscal support continue to gradually normalise market conditions.
- However, there is a risk of an increase in credit defaults when CBs support fades. Therefore, investors should ensure that they don’t go too low in the credit quality spectrum.
Euro Investment Grade Corporate
IG, and notably BBB-rated issuers, are the ideal segment for investing in an environment of low growth, low interest rates and rising default rates. Investors demand will continue to be driven by a need for return and the probability of default of these issuers remains very low. Among different credit markets, EUR IG valuations look attractive, while fundamentals tend to show a lower financial leverage than in the US.
AMUNDI PRIME EURO CORPORATES - UCITS ETF DR
- On duration, we refrain from making any strong calls and keep our stance close to neutral, with a constructive bias on the US.
- We are also constructive on US breakeven inflation on a medium to long term perspective, in a context of monetary expansion.
US Government Bonds
On a GFI perspective, Fed buying, especially in the short to medium term segments, safe haven demand and the global search for yield enable us to maintain a preference for US Treasuries. In addition, UST yields still have room to fall if the Fed signals an openness to negative rates. We are more cautious on longer maturities, expecting a steepening of the long part of the curve.
AMUNDI US TREASURY 1-3 UCITS ETF – USD
Breakeven Inflation US
We see value in being long US inflation given the unprecedented fiscal and monetary policy responses and the improving growth outlook in the US. After four decades of low inflation across most economies and strong disinflationary forces, we may enter into a new regime of higher inflation. The inflation premium is currently too low to protect against that risk.
Equity: Cautious on equities, playing the rotation towards value & cyclicals
- Current valuations are the result of a liquidity-driven rally. In H2 2020, a check on earnings growth has to be considered and the sustainability of business models/balance sheets is likely to remain a key element of discrimination.
- We suggest combining a high level of liquidity with some exposure to value and cyclical assets that offer high performance potential in the event that a favorable scenario plays out.
Two factors have revived international interest for European Equities: the Recovery Fund plan, should it be confirmed, and the cyclical/value catch up. This revival has further to go.
AMUNDI MSCI EUROPE VALUE FACTOR UCITS ETF
AMUNDI INDEX MSCI EUROPE SRI UCITS ETF DR
Japan has experienced ups and downs in the previous cycle. Being one of the most cyclical markets in the world, it is benefiting from the current cyclical catch-up. Companies have low leverage, and the yen – inversely correlated to Japan’s relative performance – usually weakens when risk perception recedes.
AMUNDI PRIME JAPAN UCITS ETF DR
Commodity: CBs easing and economic uncertainty still positive for gold
- Gold is undoubtedly the commodity most likely to gain from the current uncertain and fragile economic environment. It has benefited from the dramatic change in central banks’ monetary policies during the pandemic crisis.
Métaux précieux : l'or
The massive liquidity injection into the financial system by central banks resulted in
AMUNDI PHYSICAL GOLD ETC
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