KEY THEMES & MACRO ENVIRONMENT
- Goldilocks still in place – the global economy started the year on firmer footing, but coronavirus disruptions will inevitably hit it. We expect a recovery, especially given that there is plenty of policy stimulus.
- Coronavirus risk surmountable – market pricing has shifted from reflation to growth worries. We see risks more balanced around our base case on a 12-month horizon.
- Equity corrections have restored the risk/reward payoff – we rely on our ‘goldilocks base case’ and our market dynamics signals to buy dips.
- Equities: bought the dip – we bought US and emerging market (EM) equities in early February as per our roadmap. We are open to adding to our positions.
- Goldilocks trades: long emerging market USD debt and EMU REITs – we continue to like carry assets, supported by the goldilocks environment.
- Rates: short core EUR, long US inflation, short USTs via options – we still see fixed income markets as rich, but virus fears dominate in the short term.
- FX: closed long USD – our long USD versus EUR and GBP had a good run this year. Our technical and fundamental assessment is more balanced now.
- Long gold – gold still shines given the generally easy monetary policy, falling real yields and in both of our main risk scenarios – recession and reflation.
- De-globalisation trades – we are long CAC/DAX and long USD/CNY as we remain strategically bearish on globalisation.
- Risk utilisation – we increased our active risk by buying US and EM equities.
- Factor exposures from core views – our factor exposure is long market risk and neutral on most other factors, including duration.
- Specific/tactical trades – we have implemented four trades outside of our MFA portfolio optimiser; these help us diversify our portfolios.
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