Robeco remains cautious on risky assets following a tumultous first few weeks of the presidency of Donald Trump.
The biggest surprise for the New Year was not the fact that Trump turned out to be as erratic and vocal as he was during the campaign trail, but rather that risky assets have chosen to ignore the alarming headlines we have seen so far. Either this means that markets have become too complacent, or the headlines have been one-sided in expressing the risks (trade wars), while ignoring the potential gains (tax cuts).
It is easy to sketch a horrible meltdown scenario right now, but the simple fact is that underlying economic data has surprised on the upside, with earnings bottoming out, and that is enough to explain the current upward drift in stocks.
We remain cautious on an overall risk stance, and prefer to look for relative trades right now. On balance we have put up a relative bond trade (long US, short France) and moved to an overweight in emerging market debt as well as the US dollar.
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