Investment - Articles - The good, the ‘muddle through’ and the ugly


AXA IM: Life after Brexit - uncertainty prevails, reduce risk further

     
  1.   Our baseline scenario, which assumes marginally slower growth suggests no material changes to our asset allocation. We recommend some changes within the asset classes. The level of uncertainty post Brexit has increased for Europe. We keep an overall prudent stance with an underweight in equities and an overweight in credit but lift cash back to neutral. We suggest reducing euro and emerging European equities to underweight. Within fixed income we move US Treasuries to overweight but take profits as far as euro sovereign spreads and gilts are concerned following the sharp decline. 
  2.  
  3.   Europe muddles through: the Brexit vote has created a large uncertainty for the UK and to some extent, albeit limited, for the rest of Europe. Our growth forecasts have been reduced by 2 percentage points (pp) for end of 2017 for the UK and 0.3 pp for Europe. We believe the Bank of England will lower rates to zero and embark on quantitative easing (QE) in H2 this year. We do not expect the European Central Bank (ECB) to do more than expanding QE by six months without changing the capital key. Meanwhile, the level shift in uncertainty should lead the US Federal Reserve (Fed) to slow down rate normalisation and not lift rates before December.
  4.  
  5.   Downside risk: political risks materialise which could test macro policy and lead to a more marked slowdown. In that scenario, the ECB would ease more substantially. The Fed would refrain from hiking rates.
  6.  
  7.   Upside risk: a swift negotiation process preserves a strong UK partnership with the EU. Risk aversion would fade rapidly. Safe haven bond yields would rise back to pre-Brexit levels and equities would stage a temporary come back.
  
 To read the full document please click here 

Back to Index


Similar News to this Story

Tariff turmoil makes DC providers reassess US allocations
DC providers are underweighting US equities amid concerns over tariffs, dollar weakness and concentration in mega-cap growth stocks. Market turbulence
Comment on on FCA Targeted Support proposals
Responding to the FCA’s proposals on Supporting consumers’ pensions and investment decisions: proposals for targeted support the Association of Profes
Broadstone advises on buyin for BDO LLP with Just Group
Collaborative approach between the Sponsor, advisers and both trustee boards secures transaction at an affordable cost. Benefits for all 1,000+ member

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.