Vår "House View"

US Treasuries

LIGHT

Yields are supported by muted inflation pressures and continued QE purchases, but the deteriorating fiscal outlook and expensive valuations are becoming more of a concern.

European Bonds

LIGHT

Core European bond markets still benefit from safe haven flows and moderate levels of inflation but investors remain concerned about slow progress in tackling the fiscal pressures in certain Euro-zone members.

UK Gilts

LIGHT

Although the muted economic recovery and fiscal tightening provide support for the gilt market, valuations have reached expensive levels, while further QE worries some investors about future inflation risks.

Japanese Bonds

NEUTRAL

Japanese government bonds are not experiencing the same levels of volatility as in other markets, although low levels of yield deter many global investors.

Global Inflation-Linked Debt

NEUTRAL

While valuations in individual countries need to be examined carefully, the asset class benefits from investor worries about future inflation triggered by easy monetary policies.

Investment Grade Debt

HEAVY

Positive corporate cashflows should enable a renewed decline in historically wide spreads, although the volatility of the underlying government bond markets will periodically affect total returns.

High Yield Debt

VERY HEAVY

Although concerns about risks to economic growth have affected valuations, this market benefits from an attractive carry and low levels of default as corporate balance sheets improve.

US Equities

HEAVY

Good cost control and continued export demand have supported strong earnings growth, although consumer debt and the housing market overhang limit many domestic stocks.

European Equities

LIGHT

Domestic growth prospects continue to look poor against the backdrop of very tight fiscal policy and modest structural reforms, although global exporters will benefit from overseas demand.

Japanese Equities

VERY LIGHT

While the reconstruction budget will support economic momentum in early 2012, this has been well flagged in advance and the market is expensive on many measures.

UK Equities

NEUTRAL

Companies increasingly face headwinds from weak consumer spending and slower European export demand, although many businesses continue to find strong demand across emerging economies.

Developed Asian Equities

LIGHT

Slower economic growth in key economies such as China affects the wider region, while monetary policy is only slowly being eased in response to continued inflationary pressures.

Emerging Market Equities

NEUTRAL

Selection is increasingly required; while some benefit from strong commodities demand and upgrades to sovereign debt ratings, others face growing inflationary pressures and valuation concerns.

UK

HEAVY

The weak growth environment is expected to impact prices in the near-term but yields remain attractive compared to other assets, suggesting above cash returns over a three-year holding period.

European

NEUTRAL

The market remains polarised with Northern European centres and good quality assets expected to be relatively robust.

North American

HEAVY

We see the best prospects in under-developed industrial locations in Canada and the cyclical US office markets where future supply is at 30-year lows.

Asia Pacific

NEUTRAL

Excessive supply in several key markets, e.g. China, will hold back growth, but offices in Australia, for example, remain supported by a good demand/supply balance.

Foreign Exchange

Very Heavy US Dollar, Neutral Sterling, Light Yen and Euro

The euro and yen remain expensive and a headwind to economic recovery. Sterling’s value will not be crystallised during another bout of QE. The US dollar is cheap and benefiting from cross-border flows.

Global Commodities

NEUTRAL

Strong demand for commodities, led by consumer trends and infrastructure projects in emerging economies, but higher prices has encouraged new supply, while a stronger dollar encourages negative investment flows.

LIGHT

Central banks in more economies are reacting to the slowdown in global economic growth by easing monetary policy.