Perspectivas de Inversión 2014

Resumen de Nuestras Previsiones


In Europe, the levels of stress have continued to abate and political events had a lower impact on financial markets than during the previous years. The spreads of peripheral sovereign debt continued to decline and European equities were much in demand over the course of the year. The main central banks confirmed their positions as being the most influential drivers of the markets; in May, the talk of tapering by the Federal Reserve had a significant effect on bond yields and emerging market assets. In October, the ECB decided to cut its refinancing rate following an unexpected drop of inflation.


In 2013, the financial markets were characterized by a large divergence of performances across asset classes. The best performing assets were the equities of the advanced economies, while emerging market equities lagged. It was a difficult year for fixed-income assets, with many market segments recording negative returns, in particular emerging market debt; in contrast, high-yield bonds performed well. The prices of most commodities ended the year lower, with gold losing more than a quarter of its value.


Global economic growth is expected to improve in 2014 led by advanced economies. The headwinds represented by fiscal drags in the US and in Europe will dissipate and a higher level of economic activity should be supported by a certain degree of re-synchronization of growth across the different regions, including the Euro zone. The main risks are represented by the upcoming changes to the Federal Reserve’s monetary policy, the fragility of the Euro zone recovery and the implementation of structural reforms in emerging economies.


Monetary policies will remain very accommodative in the developed economies even if they will start to diverge as the Federal Reserve begins to reduce the size of its asset purchase program. However, this change of policy does not represent a tightening of financial conditions but a normalization of interest rates in the context of more supportive economic conditions; the Fed will maintain short-term interest rates close to zero in 2014. In contrast to the Fed, the European Central Bank maintains a bias to an easier monetary policy to contain the threat of low inflation and support the nascent recovery.


At this stage, we will not be making major changes in terms of asset allocation, as we recommend maintaining the current overweight into equities and continue to trim our exposure to debt instruments with unrewarding characteristics.


The allocation to investment grade bonds should decrease further but, for Euro based portfolios, we will be holding our core position in a fund investing into Euro-denominated investment grade credit with an active hedging of duration risk. Conditions remain supportive for high-yield bonds as there is still room for some spread compression and asmost technical factors are positive.


The reduction of tail risks and the rich valuations of the safest debt instruments make equities the most attractive asset class. From a regional perspective, our allocation will continue to focus on developed markets despite the lower valuations of emerging market equities. Within emerging markets, we favour Asian equities over Latin American ones and maintain our current exposures to Chinese and to Asian equities.

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