House View Q4, 2021

Macroeconomy

In our baseline scenario, we expect the global economy to continue its recovery in the last quarter of 2021. We believe that central banks will gradually start to withdraw asset purchases and inflationary pressures will be transitory. That said, we expect neither the FED nor the ECB to hike interest rates over until the end of 2022. We forecast 2021 GDP growth of 6.1% for the US, 6.4% for the UK, 5.1% for the EU, and 7.9% for China.

 

Conventional Portfolio: Equities VS Bonds

In the long run, we maintain our overweight position on equities relative to bonds, while – in the short term – we hold call options on volatility for protection, due to supply disruptions and slowing growth momentum.

For equities, over the medium term, we believe that Japanese stocks have room to outperform other developed markets. All in all, we remain broadly positive on equities while expecting a slower pace of expansion.

On the contrary, we remain bearish on fixed income since rising bond yields add pressure to bond prices and have an overall negative performance. From this asset class, an exception we like is China, where the Chinese 10-year Government Bonds offer an attractive 3%.

 

Commodities

The gradual reopening of the global economy, with strong demand and more stable consumer spending, will prop up commodity prices. With shortages in labor and low inventories, we believe that oil prices will continue to rise, heading towards $85/bbl during Q4 while closing lower at $75/bbl by the end of the year. In addition, we see the natural gas rally to continue exceeding $6.8 per MMBtu due to supply bottlenecks. Europe’s bigger suppliers, Russia, and Norway have current inventories 11% below the five-year average.

 

Currencies

Over the medium term, the Chinese Central Bank is likely to ease further due to Evergrande in China, as a result, we expect a depreciation of CNH. At the same time, rising gas prices will support gas exporters (Russia) and the RUB. Therefore, we like a put option to CNH/RUB with spot at 10.4 and a stop loss at 11.6.

 

Equity Index: positioning for the Q4

• US: financial, insurance, energy, real estate, technology, infrastructure, mid-cap
• EU: health care, ESG, infrastructure, financials
• Japan: industrials, consumer discretionary, materials

 

Commodities:

• Oil: exceeding $85/bbl during Q4
• Natural Gas: exceeding $ 6.8 per MMBtu

 

Bonds:

• Asian High Yield
• ESG Bonds
• Chinese Government Bonds: 10-year offering 3%
• US Treasury 10%: 2% until the end of 2021

 

Forex:

• Buy: EUR/NOK
• Buy: USD/AUD
• Buy: USD/SEK
• Buy: USD/CNH
• Sell: CNH/RUB
• Sell: EUR/USD

 

INDICES we like to have exposure to

• S&P 500
• REIT
• MSCI US
• MSCI All Country World Index
• PAVE Global Infrastructure
• iShares Global Clean Energy ETF
• iShares Healthcare Innovation UCITS ETF

 

Longer Term Themes: We like

• Agriculture, Food
• Automation, Robotics
• Cyber-security