After an unusually challenging year, the start of 2019 may have been more encouraging, but increased uncertainty and volatility are likely to persist.
In this year’s publications including The Intelligence Report, we aim to help readers navigate these uncertain waters. We believe the themes identified at our recent Investment Forum can provide useful insights to better understand a fast-changing world. They are globalisation, technological change and the emergence of the superstar company; increasing inequality; the potential of these forces threaten to undermine neoliberal orthodoxy; and climate change. We will regularly publish articles on these themes over the course of the year.
The dramatic market developments at year-end have left us with much to think about as we enter 2019. First off, Steven Friedman reviews the recent macroeconomic developments and the gap between still buoyant “hard” economic data and the significant weakening in “soft” – business and consumer confidence – data, but is optimistic about the resilience of the US and global economies. Some of his optimism relates to encouraging developments in Sino-US trade tensions, a subject covered by Chi Lo.
Alexandre Jeanblanc describes how Copenhagen is making big strides towards becoming the world’s first carbon neutral city, combining increased usage of alternative energy sources, improved building energy efficiency and eco-friendly transport. Daniel Morris, Alaa Bushehri and Michelle Fan tackle globalisation and technological change, explaining the framework introduced by Professor Richard Baldwin at our Investment Forum. Lastly, Guillermo Felices and Maximilian Moldaschi explore the medium-term implications of the new market environment and update their tactical asset allocation recommendations.
The US labour market is solid, but recent PMI and other surveys show optimism waning and housing data weak. That said, a more dovish Fed, easing trade tensions and a still-strong services sector suggest that GDP growth should remain stable.
The signs are that restarted Sino-US trade talks may follow a more constructive path than they did last year. Both sides by now have a clearer idea of what’s at stake – economically and politically – if that doesn’t happen.
In progressing towards a carbon-neutral society, the Danes are already bringing home the bacon. With enthusiastic engagement at the community, business and political levels, Denmark looks set to be the first country to achieve carbon neutrality.
Globalisation is not new and while protectionism and a national focus in many countries could threaten its achievements, it looks set to be here to stay, given its existing and future benefits and efficiency gains.
After years of central bank influence, bond markets are now pricing in the unwinding of QE. This should reverse low levels of term premia and real yields. With core bond markets changing structurally, are bonds still useful for hedging?
We remain structurally neutral equities, and we are underweight core bonds in view of gradually rising inflation and monetary policy normalisation. We are open to being more tactical and ensure we are appropriately hedged & diversified.
 The Intelligence Report appears roughly every two weeks and offers investors insights into the topics that we believe matter to them from around BNP Paribas Asset Management. Contact your local representative for more information.
 The dashboard shows the asset allocation in our portfolios and reflects the decisions of the Investment Committee of the Multi-Asset team at MAQS.