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Investment traffic lights

Our tactical and strategic view



  Regions 1 to 3 months until Sep 2017

United States


Europe (equities)

We expect the valuation spread between European and U.S. equities to remain at an elevated level, given the uncertainties in the European financial sector, upcoming elections and the unclear implications of Brexit. However, we have recently seen earnings revisions turning slightly positive in Europe.




United Kingdom (UK)

United Kingdom (equities)

So far,Brexit has proved less of a drag on the economy of the United Kingdom then initially thought, leading us towards a neutral stance for the overall British market. By causing the British pound to plunge, it is also cosmetically boosting the value of overseas earnings when reported in local currency. This has been particularly helpful for large, international companies.

Emerging Markets

Asia ex Japan


Japan (equities)

We are sticking to our overweight on Japan given long-term corporate-governance improvements. We however find it difficult to predict the implications of the next Japanese policy move and would rather focus on company fundamentals, which remain solid in our view. Strong balance sheets should more than offset the effects of weaker growth.

Latin America

Latin America (equities)

In emerging markets we see clear signs of macro stabilization and a cyclical recovery, some of which is commodity-price driven, prompting us to raise earnings estimates – in Latin America’s case to above consensus. We remain neutral overall, as the market has already strongly rebounded, and as the political challenges for example in Brazil remain high.


Consumer staples




Consumer discretionary




Information technology



Small and mid cap

Fixed Income*

Fixed income**

  Rates 1 to 3 months up to Sep 2017

U.S. Treasuries (2-year)

U.S. Treasuries (10-year)

U.S. Treasuries (30-year)

UK Gilts (10-year)

UK Gilts (10-year)

Following the liquidity support by the Bank of England and the resulting fall in yield, we are downgrading Gilts to neutral. Going forward, a key question will be how strongly inflation picks up in 2017, due to the weaker pound; we are currently expecting 2.4%. Another wild card is the future path of fiscal policy.

Italy (10-year)

Spain (10-year)

Spanish government bonds (10-year)

We have recently moved towards neutral on Spanish government bonds. The strong performance in recent years was backed by the European Central Bank’s extraordinary measures. These are likely to continue, but the potential for spreads tightening further compared to Eurozone core countries looks increasingly limited. Spanish politics is unlikely to help either any time soon, as yet another election looms.

German Bunds (2-year)

German Bunds (10-year)

German Bunds (30-year)

Japanese government bonds (2-year)

Japanese government bonds (10-year)


U.S. investment grade

U.S. high yield

Euro investment grade

Euro high yield

Euro high yield

We continue to see upside in euro high yield and stick to our positive view. Euro high yield are one of the few euro asset classes that still offer both meaningful, positive yield at valuations within historic norms. As a result, they should continue to benefit from a stable macro-economic background, paired with a favorable monetary environment. profitieren

Asia credit

Emerging-market credit

Securitized / specialties

Covered bonds

U.S. municipal bonds

U.S. mortgage-backed securities







Longer term we still expect the British pound (GBP) to weaken as a result of the Brexit vote and the UK’s twin deficit. Tactically, however, we believe that GBP will trade sideways versus the U.S. dollar (USD) after the plunge it saw at the beginning of October. The U.S. election might weigh on the USD in the short term.


Emerging markets

Emerging-market sovereigns






Real estate (listed)

Real estate (non-listed)

Hedge funds

Private Equity2

Comments regarding our tactical and strategic view

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.


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 June 2017

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


*as of 9/27/16.


1Spread over German Bunds


2These traffic-light indicators are only meaningful for existing private-equity portfolios.

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