Antoine Lesn\u00e9, Head of SPDR ETF Strategy & Research, EMEA
\nThe last fortnight has featured two items of particular interest:
\n
1) a returned focus on the US Federal Reserve (Fed);
\n
2) and (at last) some market reaction to the impending parliamentary elections in Europe.<\/p>\n
Attention to the Fed jumped after President Trump\u2019s speech to Congress on 28 February, which
\nconfirmed hopes of boosting fiscal spending and cutting taxes. Whilst there was a distinct lack of
\nspecific detail on policies it was enough to drive expectations of higher US GDP and, a rate hike in
\nMarch, rallying from nearly a 30 percent to around a 90 percent likelihood.
\nIn late February, European sovereign markets started to price in political risk, particularly the
\npossibility of anti-EU candidates winning the elections in the Netherlands, France and perhaps Italy.<\/p>\n
Investors rushed into short-duration German bunds in a quest for safe, cash-like assets. At the same
\ntime, French and Italian bond yields widened against German ones across all durations.
\nThe continued strength of UK equities and gilts belies the increasing chatter on Brexit, which
\noccurred as the Lords voted against the government on plans for Brexit.
\nDespite political uncertainty, fundamentals for equities and credit generally look positive and a
\ndiversified portfolio would appear to be the best approach for investors.<\/p>\n
Investors seek safety amidst European elections<\/strong><\/p>\n The strongest returns across all sectors came from more defensive areas of the equity market, Whilst US Financials continue to see inflows, as prospects for US bank deregulation re-establish Defensive factors back in favour<\/strong><\/p>\n As reflected by moves across the market, defensive styles outperformed. Low volatility shares have been out of favour for nearly six months since becoming highly expensive in the wake of post-Brexit vote turbulence.<\/p>\n The demand for lower risk options has been prompted by heightened European political uncertainty. The popularity of high dividend equities is consistent with this theme, as is the sell-off in smaller companies, often seen as more risky.<\/p>\n En marche to March!<\/strong><\/p>\n Strong US economic data and a more hawkish Fed saw the US Treasury index yield climb 20 bps, German bunds sold off in sympathy with US Treasuries, correcting some of the move in French Strong US economic data and a more hawkish Fed saw the US Treasury index yield climb 20 bps,
\nnamely Consumer Staples, Health Care, Telecommunications and Utilities; prompted by increased
\npolitical uncertainty, despite volatility remaining very low.<\/p>\n
\nthemselves; on this side of the Atlantic there was a pause for breath, as markets consider the
\npotential implications of more populist political regimes<\/p>\n
\npushing performance down last week and putting pressure on fixed income exposures. Corporate
\nbonds performed better \u2014 as expected \u2014 but the best position was in high yield with a short
\nduration bias. Emerging market debt underperformed but the case for the asset class remains, given
\nthat yield-carry can weather a moderate strengthening in 2017.<\/p>\n
\ngovernment bond spreads. The skew remains to the downside for French Government Bonds, OATs
\n(Obligations Assimilables du Tr\u00e9sor), though, in the run-up to the presidential elections. Overall,
\ninvestors would do well to consider an exposure to credit over treasuries.<\/p>\n","protected":false},"excerpt":{"rendered":"
\npushing performance down last week and putting pressure on fixed income exposures. Corporate
\nbonds performed better \u2014 as expected \u2014 but the best position was in high yield with a short
\nduration bias. <\/p>\n","protected":false},"author":1,"featured_media":61426,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1483],"tags":[1809,1655,1651,1437,2087,2068,1712],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/61428"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=61428"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/61428\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/61426"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=61428"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=61428"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=61428"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}