Updated monthly! Here’s your quick take on 6 global asset categories from investing experts at Aberdeen Standard. Review these top-line summaries for government bonds, corporate bonds, equities, property and commodities. Then, visit Aberdeen’s Closed-End Fund Investor Center to discover data and insight about global fund opportunities.
| ASSET CATEGORY | ALLOCATION | COMMENT | |
|---|---|---|---|
| 1 | GOVERNMENT BONDS | Negative | We see most government bonds as generally unattractive; yield pick-up is not sufficient. Global monetary policy path has been altered but largely priced now into rates. |
| US Treasuries | Negative | Recent weak US economic data has prompted dovish comments from the US Federal Reserve. US Treasury yields have fallen significantly over the past few months, near the bottom of a range, pushing them to unattractive levels. | |
| UK Gilts | Neutral | While the economy is slow growing, the Bank of England is still warning about future interest rate increases if Brexit uncertainty is removed. | |
| European Core | Neutral | Eurozone rates remain low; ECB policymakers have become wary of recent European economic weakness, further delaying their tightening monetary policy plans. | |
| European Periphery | Neutral | The spread between peripheral and core European government bonds is quite wide, but we are cautious in view of political risks. | |
| Japan | Negative | Japanese government bond yields are very low compared with other markets, still held down by very strict yield curve control from the Bank of Japan despite the new flexible target. | |
| Australia | Positive | We remain long of government rates as recent Australian economic data shows signs of weakness. | |
| US TIPS | Positive | This market may provide downside protection, as well as a degree of protection against any future inflation surprises. | |
| UK Index Linked | Negative | Recent Sterling strength and uncertainty caused by lengthy Brexit negotiations imply inflation risks are to the downside, while the Bank of England has revised down growth and inflation expectations. | |
| → Find more information about the Aberdeen Asia-Pacific Income Fund, Inc. (FAX). | |||
| 2 | CORPORATE BONDS | Positive | The spread between corporate debt and government bond yields have widened, offering some selective value. |
| US Investment Grade | Negative | Spreads are wider but only offer modest protection should the US economy weaken materially. | |
| UK Investment Grade | Neutral | Spreads have widened but still seen as vulnerable to economic shocks or upward surprises to gilt yields. | |
| Euro Investment Grade | Negative | European IG spreads are wider but total return looks modest. | |
| US High Yield | Neutral | US high yield spreads have widened but not sufficiently to suggest attractive returns in relation to the risks. | |
| Euro High Yield | Positive | European data has disappointed, suggesting rate hikes will experience further delays. Furthermore, net leverage in high yield companies has fallen as they have deleveraged. Both these factors are supportive for European HY spreads. | |
| Emerging Market (hard currency) | Positive | Dollar denominated debt is at attractive spreads to Treasuries and all-in yields, despite challenges in some of the larger EM economies. | |
| Emerging Market (local currency) | Positive | A lot of bad news is now priced into local currency debt following sharp currency and spread corrections. | |
| → Watch a short video on the outlook for the Aberdeen Emerging Markets Equity Income Fund, Inc. (AEF). | |||
| 3 | EQUITIES | Positive | High single digit profit growth globally provides fundamental support at a time of relatively depressed investor sentiment. |
| US | Positive | Macroeconomic momentum supports this market; the change in the Fed's interest rate path supports growth. We continue to trade the US tactically. | |
| UK | Neutral | The UK trades at cycle low valuations so we are now neutral. Brexit weakness would support the equity market via a lower pound. | |
| Europe ex. UK | Neutral | Economic expansion has faltered recently but valuations are supportive for corporate profits. Currency appreciation and peripheral political risks continue to restrain interest in stocks. | |
| Japan | Positive | Attractive as easy monetary policy and fiscal stimulus are helped by efforts to improve corporate governance, share buybacks and business investment, although yen strength periodically remains a concern. | |
| Developed Asia ex. Japan | Negative | Vulnerable to policy errors in China and worries about trade tensions. When combined with a long emerging Asia position, our underweight position creates a relative value trade that is essentially a short position, against Australia (weak banking sector). | |
| Emerging Market Equity | Positive | Asset class has discounted much of the China trade risks. Valuations have improved and investor positioning is more attractive. | |
| → Discover how the The India Fund (IFN) seeks to deliver long-term capital appreciation. | |||
| 4 | PROPERTY | Neutral | We have a preference for Real Estate Investment Trusts rather than direct investment in commercial property globally. |
| US | Neutral | Vacancies are low across most sectors and markets, although the sizeable retail sector is coming under more pressure from the rise in e-commerce. | |
| UK | Neutral | The real estate cycle is at a mature stage and limited further capital growth is expected. Income remains attractive, although risks are elevated should the UK enter recession or political uncertainty surges. | |
| Europe | Neutral | Supported by stronger economic growth and low levels of new supply while valuations are helped by the cautious ECB policy stance. Property market rallied significantly at the start of the year, as rate expectations were anchored. | |
| → Seek capital appreciation and current income with the Aberdeen Global Premier Properties Fund (AWP). | |||
| 5 | COMMODITIES | Neutral | Commodities are very sensitive to Chinese policy tightening; some commodities such as oil face an uncertain demand/ supply balance. |
| → Listen to the dividend outlook with the head of the Aberdeen Total Dynamic Dividend Fund (AOD). | |||
| 6 | CASH AND CURRENCY | Negative | With global interest rates still extremely low we still see better opportunities in risk assets. |
| Dollar | Negative | We expect US growth to slow and current positioning is extreme so we have downgraded our view. | |
| Euro | Negative | Less attractive than other major currencies, and concerns over Italy and European politics in general. | |
| Yen | Positive | An overweight position in the yen acts as a portfolio diversifier if global activity continues to disappoint. | |
| Sterling | Positive | Brexit concerns have driven sterling lower. Short of a disorderly Brexit, sterling looks undervalued. |
Important information:
Aberdeen Standard Investments is a brand of the investment businesses of Standard Life Aberdeen plc, its affiliates and subsidiaries. In the United States, Aberdeen Standard Investments is the marketing name for the following affiliated, registered investment advisers: Aberdeen Standard Investments Inc., Aberdeen Asset Managers Ltd., Aberdeen Standard Investments Australia Ltd., Aberdeen Standard Investments (Asia) Ltd., Aberdeen Capital Management, LLC, Aberdeen Standard Investments ETFs Advisors LLC and Standard Life Investments (Corporate Funds) Ltd.
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Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.
Property investments may carry additional risk of loss due to the nature and volatility of the underlying investments and may not be available for investment by investors unless the investor meets certain regulatory requirements. In considering the prior performance information contained herein, potential investors should bear in mind that past performance is not necessarily indicative of future results, and there can be no assurance that such investments will achieve comparable results.
Closed-end funds are traded on the secondary market through one of the stock exchanges. The Fund’s investment return and principal value will fluctuate so that an investor’s shares may be worth more or less than the original cost. Shares of closed-end funds may trade above (a premium) or below (a discount) the net asset value (NAV) of the fund’s portfolio. There is no assurance that the Fund will achieve its investment objective. Past performance does not guarantee future results.
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