This website uses cookies in order to improve user experience. If you close this box or continue browsing, we will assume that you are happy with this. For more information about the cookies we use or to find out how you can disable cookies, see our Cookies Notice.

Portfolio

Traditional asset classes

Within the core part of our balanced portfolio, we cover traditional liquid assets such as equities, fixed income and commodities. The chart shows how we would currently design a balanced portfolio, including alternative asset classes.2

Sources: Regional Investment Committee (RIC), Deutsche Asset & Wealth Management Investment GmbH, Deutsche Bank (Suisse) SA, as of 8/18/15

Equities

Equities have been unsettled by developments in China, but fundamentals in the developed markets remain sound. U.S. second-quarter corporate earnings came in better than expected and European earnings growth (excluding energy stocks) was even stronger. Japanese earnings have also increased. Volatility is likely to increase around a Fed rate hike but could create buying opportunities. Emerging markets have found the going tougher and could suffer further both from a U.S. rate hike and also developments in China. Emerging-market equities in economies with substantial current-account deficits could be particularly vulnerable.

Fixed income

Once the Fed starts hiking rates, the pace is expected to gentle, meaning that major-developed-market government yields are unlikely to increase sharply over the next 12 months. With the ECB persevering with quantitative easing, the differential between U.S. Treasuries and German Bunds is also likely to continue. On the corporate side, high levels of recent issuance help keep us cautious on investment grade. U.S. high-yield could be affected by concerns over energy-sector borrowers, but we continue to see some opportunities in this asset class. Emerging-markets hard-currency debt may offer relatively high yields, but also increasing levels of risk.

Commodities

Commodity prices face two key headwinds: a strong U.S. dollar and concerns about Chinese demand. In the case of oil, worries about possible future increases in supply will continue to create additional downwards pressure. While lower prices will eventually lead to lower supply, this process is likely to take time. Evidence of stronger Chinese growth might provide some support, but a sharp rebound in oil and other commodity prices looks most unlikely. Gold has benefited to a limited extent from recent market uncertainty but a rise in interest rates would probably be a negative for this commodity.

ref-1

1 This portfolio may not be suitable for all investors.

ref-2

2 Alternative investments are dealt with separately in the next chapter. Alternatives are not suitable for all clients.

Related Articles

Jul 13, 2018 New Chart of the week

Chart of the week

China's monetary base looks set to grow faster again soon

Jul 06, 2018 Chart of the week

Chart of the week

On trade, the Trump administration might have some powerful allies.

Jul 03, 2018 Investment Traffic Lights

Investment Traffic Lights

Our tactical and strategic view

Jul 03, 2018 CIO Special

Dollar pros and cons

The dollar has already reached our target. Currently, the arguments are balanced.

Jun 29, 2018 Chart of the week

Chart of the week

Do weak currencies hurt emerging markets?

Jun 22, 2018 Chart of the week

Chart of the week

In the line of fire

Jun 21, 2018 Macro Outlook

Ten years after

The long reach of the financial crisis

Jun 15, 2018 Americas CIO View

Americas CIO View

Inflation: Sometimes it skips a generation

Jun 15, 2018 Chart of the week

Chart of the Week

Looking at real federal funds rates, not a lot has happened after 7 hikes

Jun 08, 2018 Americas CIO View

Americas CIO View

Is it time for U.S. Small Caps to shine? If you pick them right

Jun 08, 2018 Chart of the week

Chart of the week

In some areas, Italy is actually doing quite well

Jun 04, 2018 Investment Traffic Lights

Investment Traffic Lights

Our tactical and strategic view

Jun 01, 2018 Chart of the week

Chart of the Week

Why emerging markets may be less vulnerable than they used to be

May 29, 2018 CIO Flash

Euro crisis 2.0?

Italy's political woes are dragging down markets while boosting our dollar call.

May 29, 2018 Americas CIO View

Americas CIO View

What do investors want from active managers?

May 25, 2018 Chart of the week

Chart of the week

A tale of two economies in the Eurozone periphery

May 24, 2018 CIO Flash

Italy's new coalition

Italian political turmoil might prove less worrisome than many think.

May 24, 2018 Americas CIO View

Americas CIO View

Oil near normal, Energy profits still below, but limited upside

Feedback

Please let us know what you think about this article/page.