Global Asset Outlook at a Glance

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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 CATEGORYALLOCATIONCOMMENT
1GOVERNMENT BONDSNegativeWe 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 TreasuriesNegativeRecent 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 GiltsNeutralWhile the economy is slow growing, the Bank of England is still warning about future interest rate increases if Brexit uncertainty is removed.
European CoreNeutralEurozone rates remain low; ECB policymakers have become wary of recent European economic weakness, further delaying their tightening monetary policy plans.
European PeripheryNeutralThe spread between peripheral and core European government bonds is quite wide, but we are cautious in view of political risks.
JapanNegativeJapanese 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.
AustraliaPositiveWe remain long of government rates as recent Australian economic data shows signs of weakness.
US TIPSPositiveThis market may provide downside protection, as well as a degree of protection against any future inflation surprises.
UK Index LinkedNegativeRecent 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).
2CORPORATE BONDSPositiveThe spread between corporate debt and government bond yields have widened, offering some selective value.
US Investment GradeNegativeSpreads are wider but only offer modest protection should the US economy weaken materially.
UK Investment GradeNeutralSpreads have widened but still seen as vulnerable to economic shocks or upward surprises to gilt yields.
Euro Investment GradeNegativeEuropean IG spreads are wider but total return looks modest.
US High YieldNeutralUS high yield spreads have widened but not sufficiently to suggest attractive returns in relation to the risks.
Euro High YieldPositiveEuropean 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)PositiveDollar 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)PositiveA 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).
3EQUITIESPositiveHigh single digit profit growth globally provides fundamental support at a time of relatively depressed investor sentiment.
USPositiveMacroeconomic momentum supports this market; the change in the Fed's interest rate path supports growth. We continue to trade the US tactically.
UKNeutralThe UK trades at cycle low valuations so we are now neutral. Brexit weakness would support the equity market via a lower pound.
Europe ex. UKNeutralEconomic expansion has faltered recently but valuations are supportive for corporate profits. Currency appreciation and peripheral political risks continue to restrain interest in stocks.
JapanPositiveAttractive 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. JapanNegativeVulnerable 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 EquityPositiveAsset 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.
4PROPERTYNeutralWe have a preference for Real Estate Investment Trusts rather than direct investment in commercial property globally.
USNeutralVacancies are low across most sectors and markets, although the sizeable retail sector is coming under more pressure from the rise in e-commerce.
UKNeutralThe 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.
EuropeNeutralSupported 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).
5COMMODITIESNeutralCommodities 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).
6CASH AND CURRENCYNegativeWith global interest rates still extremely low we still see better opportunities in risk assets.
DollarNegativeWe expect US growth to slow and current positioning is extreme so we have downgraded our view.
EuroNegativeLess attractive than other major currencies, and concerns over Italy and European politics in general.
YenPositiveAn overweight position in the yen acts as a portfolio diversifier if global activity continues to disappoint.
SterlingPositiveBrexit concerns have driven sterling lower. Short of a disorderly Brexit, sterling looks undervalued.

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