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.

Investment traffic lights

Our tactical and strategic view


  Regions 1 to 3 months up to September 2016

United States



Europe’s equities are still supported by sound economic and financial data such as credit growth, business surveys and earnings dynamics. However, we continue to stay neutral on European equities and favor Eurozone equities which are set to benefit more not only from relative U.S.-dollar strength, but also from low oil prices.



United Kingdom



We upgrade Japanese equities to overweight. The market has now fallen by around 15% since August, probably making it a good time to take advantage of its underlying merits: the soundest regional earnings dynamics, rising dividends and investment, plus major reforms in corporate governance which have started to bear fruit.

Emerging markets

Emerging markets

After revising expected emerging-market 12-month earnings growth down to zero, we downgrade EM equities to underweight. Despite the sharp sell-off, there still could be further setbacks, particularly in Latin America where consensus estimates of 2016 earnings growth look unrealistic. 

Asia ex Japan

Latin America


Consumer staples




Consumer discretionary




We remain overweight on financials. Balance sheets continue to recover, dividend payments are rising and valuations remain moderate in historical terms. In the short run, monetary policy should also strongly affect financials. Their recent softness could be reversed if the Fed started its interest-rate turnaround before year-end.


Information technology



Small and mid cap

Fixed income**

  Rates 1 to 3 months up to September 2016

U.S. Treasuries (2-year)

U.S. Treasuries (10-year)

U.S. Treasuries (30-year)

U.K. Gilts (10-year)

Eurozone periphery

German Bunds (2-year)

German Bunds (10-year)

Japanese government bonds (2-year)

Japanese government bonds (10-year)


U.S. investment grade

U.S. investment grade

We return to neutral on U.S. investment grade. Risk premiums have widened to such an extent that they may offer a sufficient buffer against defaults. The Fed’s postponement of its first rate hike also argues against an underweight. Additionally, the excess supply of the summer months is now leveling off.

U.S. high yield

EUR investment grade1

EUR high yield1

EUR high yield

We upgrade EUR high yield to overweight. Over the medium term, this segment should be supported by low default rates, good ratings, high demand, the low share of the energy and mining sectors and historically high market risk premiums. However, Brazil and automotive issuers could dampen sentiment temporarily.

Asia credit

Emerging-market credit

Securitized / specialties

Covered bonds1

Covered bonds

We downgrade covered bonds to underweight. These were not left unscathed by rising volatility and, moreover, are likely to be impaired by fears that the ECB might reduce its covered-bond purchases. Short-term, the market is also suffering from substantial new issuance, which has exceeded demand.

U.S. municipal bonds

U.S. mortgage-backed securities







Emerging markets

Emerging-market sovereigns




Real estate (listed)

Real estate (non-listed)

Hedge funds

Hedge funds

This market environment should allow hedge funds to outperform. Nervous, sideways-trading markets are particularly suited to equity-market-neutral strategies and discretionary-macro strategies, taking advantage of regional divergences.

Private equity2

*as of 9/22/15

**as of 9/28/15

Source: Deutsche Asset & Wealth Management Investment GmbH

The tactical view (one to three months)

Equity indices:

  • positive view

  • neutral view

  • negative view

Fixed income and exchange rates:

  • The fixed-income sector or the exchange rate is expected to perform well

  • We expect to see a sideways trend

  • We anticipate a decline in prices in the fixed-income sector or in the exchange rate

  • A circled traffic light indicates that there is a commentary on the topic.

The traffic lights’ history is shown in the small graphs.

The strategic view up to September 2016

Equity indices, exchange rates and alternative investments:

The arrows signal whether we expect to see an upward trend ( ), a sideways trend ( ) or a downward trend ( ) for the particular equity index, exchange rate or alternative asset class.

Fixed income:

For sovereign bonds, denotes rising yields, unchanged yields and falling yields. For corporates, securitized /specialties and emerging-market bonds, the arrows depict the expected move of the option-adjusted spread over U.S. Treasuries, if not stated differently. depicts an expected widening of the spread, a sideways spread trend and a spread reduction.

The arrows’ colors illustrate the return opportunities for long-only investors.

  • positive return potential for long-only investors

  • limited return opportunity as well as downside risk

  • high downside risk for long-only investors

Tactical view:

  • The focus of our tactical view for fixed income is on trends in bond prices, not yields.

Strategic view:

  • The focus of our strategic view for sovereign bonds is on yields, not trends in bond prices.

  • For corporates and securitized/specialties bonds, the arrows depict the respective option-adjusted spread.

  • Both spread and yield trends influence the bond value. Investors who aim to profit only from spread trends must hedge against changing interest rates.

Related Articles

Jul 16, 2018 New Americas CIO View

Americas CIO View

How much Value is to be found abroad?

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 08, 2018 Americas CIO View

Americas CIO View

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

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 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

May 18, 2018 Chart of the week

Chart of the week

Even U.S. corporations fear the impact of Donald Trump's trade politics

May 09, 2018 Americas CIO View

Americas CIO View

Neither higher wages, oil, nor federal funds rates threaten margins

May 03, 2018 CIO View QuarterlyFocus Topic

Rising interest rates

Will rates unrattle equity markets?

May 03, 2018 Investment Traffic Lights

Investment Traffic Lights

Our tactical and strategic view

Apr 30, 2018 Americas CIO View

Americas CIO View

Volatility: Be contrarian short-term, but respect it longer-term

Apr 27, 2018 Chart of the week

Chart of the week

U.S. bond yields leave German yields further behind. Is the dollar following suit?

Apr 24, 2018 Americas CIO View

Americas CIO View

Sizing up Banks and Tech


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