By continuing on this site you have agreed to cookies being placed and accessed by this website. More information and adjusting cookie settings.
Forward-looking indicators are pointing to a modest acceleration of the US economy. But the rest of the world is slowing. An escalating European debt crisis is pushing the ECB into more monetary easing and EU countries into better governance for the eurozone. This will not address southern European countries’ lack of competitiveness.
During the last month, we upgraded our view on equities to neutral. We no longer believe that the risks of a further decline outweigh the likelihood of a rebound. We expect the ECB to take on a larger role in fighting the worsening debt crisis, thus staving off a depression in the eurozone. But with the region in recession and with moderate growth elsewhere, we do not forecast strong returns for stocks.
The outlook for real estate closely resembles the one for equities. Access to funding will remain an important issue for the foreseeable future.
We are inclined to take a positive view on investment grade and high yield bonds relative to their government counterparts for 2012. In the short term, however, we maintain a neutral view. We need more clarity on policymakers' choices.
The strong uptrend in defensive equity sectors has ended. In recent months, performance has been mixed. But we prefer to take a wait-and-see stance before retreating from our positive view on defensives.
We believe the current low yields on government bonds—Germany’s are still close to their lowest level for more than 200 years—do not reflect the inflation risks in the medium- to long term. However, the low inflationary risks in the short term must be taken into account.
Gold is the subject of our monthly special. All the gold on the planet is worth 37% of the total capitalization of global equity markets. That is exactly in line with the historical average over the 1970-2011 period, but above the 23% median. As elevated uncertainty around the economy will continue for a while, we believe it is too early to anticipate a correction in the gold market.