Investment Institute
Punto de vista del CIO

Sunny with the odd shower

  • 26 Abril 2024 (5 min de lectura)

The big picture is unchanged. Global growth is positive, and expectations are being nudged higher. Inflation is coming down, but the phrase “the final mile of disinflation is hard” is a well uttered one. This is leading to a divergence in the rates outlook between the US and Europe and US yields have risen relative to European bond yields. Markets have not yet priced out all Federal Reserve (Fed) rate cuts for this year, but they are moving that way. Bond bulls would love Fed Chair Jerome Powell to say he will not raise rates. A lot depends on the data. Just note, however, Japan shows that downside inflation surprises are possible.

Stock times 

Market returns so far in 2024 demonstrate that the macro backdrop has been and remains more supportive for equities than fixed income. Markets have evolved to price out most interest rate cuts for this year, which has been detrimental to the most interest rate sensitive parts of bond markets. The other side of that is that growth is stronger and inflation still higher than desired, which means nominal growth is still healthy. Corporate profits tend to go up as economies expand in nominal terms. Both the US and Europe saw nominal GDP growth of around 6.5% in 2023, and 2024 looks set for another reasonable year of nominal growth. Nominal growth is good for equities but a little too good for central banks to cut interest rates as much as had been expected.

Better for bonds 

Outside of the Fed hiking rates, fixed income markets offer attractive carry returns. The first four months of the year have seen bond prices fall because of the revision to the central bank view, but from now on total returns should become more positive as income dominates. A total return from investment grade credit of 3%-4% over the balance of the year would not be surprising, with something like 5% in high yield. Should Powell explicitly rule out a rate hike then returns would be boosted. Of course, he needs the data to conform to the central bank’s view for that to happen and it has not done so yet.

Positive surprises 

The first quarter earnings season in the US equity market looks healthy. With not quite half of companies having reported, average earnings growth is coming out at around 6% and, in aggregate, earnings have surprised to the upside by around 10% relative to forecasts. All sectors show positive earnings surprises and positive earnings growth (except for energy, materials, and healthcare). On the technology side, results have been strong with Microsoft and Alphabet (Google) reporting strong numbers relative to expectations. Shares in the sector have recently given back much of their year-to-date gains, but the earnings results and the narrative around strong capex spending on technology and artificial intelligence should propel better performance ahead of the US election.

60:40 doing well 

Equity returns have dominated a typical 60:40 type portfolio strategy over the last year. This may become a little more balanced as income returns play their role in the fixed income part. What has not been tested in this new regime is the ability of bonds to offset any meaningful downturn in equity markets. A normal cyclical downturn, triggered by weaker growth and a profits recession, would involve significant cuts in rates, allowing fixed income to outperform. The last time this happened was in the global financial crisis. In 2022, both equities and bonds delivered negative returns at the same time as monetary policy was adjusted. The chances of that happening again are limited, so bonds should provide something of a more typical hedge if equity markets do turn lower in response to a weak profits outlook.

Risk to sentiment

For now though, the fundamental outlook is solid. The biggest near-term threat to equity markets would come through the channel of a hit to sentiment leading to a higher risk premium (lower price-to-earnings ratio). There are all kinds of things that could do that. Most obvious is a Fed rate hike but geopolitical concerns are also a threat to investor confidence. So far, as is often the case, immediate market reactions to geopolitical events have been short-lived. Both the conflicts in the Middle East and Ukraine have the potential to escalate and pose more of a threat to global trade and inflation and create increased uncertainty. However, so far, they have not.

Start-stop tightening 

There had been concerns that a change in the Bank of Japan’s (BoJ) monetary stance would create an incentive for Japanese investors to repatriate overseas investments, putting upward pressure on the Japanese yen and hitting markets like US Treasuries. Nothing could be further from what has turned out to be the case. The BoJ has made some modest adjustments to its monetary stance, but the yen has just hit its lowest level against the dollar since 1990. The Tokyo consumer price inflation number came out at 1.8% year-on-year in April, against economists’ expectations of 2.5% and a March inflation rate of 2.6%. The BoJ expects inflation to average 2.8% this year which would rely mostly on the yen becoming even weaker and energy prices remaining high. There just does not seem to be a lot of domestically driven inflation in Japan. As such, further monetary tightening is unlikely anytime soon. It started, and now it has stopped. Japan is not a threat to global bonds. What it may be, however, is an example of how the deflationary forces at play for much of the last 20 years are hard to shake off, even after a (mostly) transitory inflation shock.

US to become a more costly hedge 

For euro and sterling-based fixed income investors, the US bond market remains attractive from a yield point of view. Hedged back into euros or pounds, US fixed income still provides a pick-up relative to local yields. That could change. If the Fed stays on hold and the European Central Bank and the Bank of England cut rates, the currency hedge cost will worsen. The window for investors who hedge their currency exposure to get a yield pick-up from investing in US credit could start to close soon.

Calm and sunny conditions 

Markets are calm. The VIX index of equity volatility shot up at the beginning of April but has receded. The earnings backdrop is positive. Yet there will continue to be concerns about near-term inflation developments and the stickiness of inflation in the US services sector. As such, short-duration credit strategies should remain in favour, alongside equities that benefit from solid growth in earnings. If seasonals are anything to go by, May should be a decent month for a balanced portfolio.

(Performance data/data sources: Refinitiv DataStream, Bloomberg, as of 25 April 2024, unless otherwise stated). Past performance should not be seen as a guide to future returns.

Risk beats cash
Opiniones por clase de activo Punto de vista del CIO

Risk beats cash

  • por Chris Iggo
  • 17 Mayo 2024 (3 min de lectura)
Investment Institute
Euro Long-Term Credit
Comentario del gestor del fondo Renta Fija

Euro Long-Term Credit

  • por Benoit Guerineau, Pauline Parent
  • 09 Mayo 2024 (5 min de lectura)
Actualización Estrategia de Inversión
Sunny with the odd shower
Opiniones por clase de activo Punto de vista del CIO

Sunny with the odd shower

  • por Chris Iggo
  • 26 Abril 2024 (5 min de lectura)
Investment Institute


    Este documento tiene fines informativos y su contenido no constituye asesoramiento financiero sobre instrumentos financieros de conformidad con la MiFID (Directiva 2014/65 / UE), recomendación, oferta o solicitud para comprar o vender instrumentos financieros o participación en estrategias comerciales por AXA Investment Managers Paris, S.A. o sus filiales.

    Las opiniones, estimaciones y previsiones aquí incluidas son el resultado de análisis subjetivos y pueden ser modificados sin previo aviso. No hay garantía de que los pronósticos se materialicen.

    La información sobre terceros se proporciona únicamente con fines informativos. Los datos, análisis, previsiones y demás información contenida en este documento se proporcionan sobre la base de la información que conocemos en el momento de su elaboración. Aunque se han tomado todas las precauciones posibles, no se ofrece ninguna garantía (ni AXA Investment Managers Paris, S.A. asume ninguna responsabilidad) en cuanto a la precisión, la fiabilidad presente y futura o la integridad de la información contenida en este documento. La decisión de confiar en la información presentada aquí queda a discreción del destinatario. Antes de invertir, es una buena práctica ponerse en contacto con su asesor de confianza para identificar las soluciones más adecuadas a sus necesidades de inversión. La inversión en cualquier fondo gestionado o distribuido por AXA Investment Managers Paris, S.A. o sus empresas filiales se acepta únicamente si proviene de inversores que cumplan con los requisitos de conformidad con el folleto y documentación legal relacionada.

    Usted asume el riesgo de la utilización de la información incluida en este documento. La información incluida en este documento se pone a disposición exclusiva del destinatario para su uso interno, quedando terminantemente prohibida cualquier distribución o reproducción, parcial o completa por cualquier medio de este material sin el consentimiento previo por escrito de AXA Investment Managers Paris, S.A.

    La información aquí contenida está dirigida únicamente a clientes profesionales tal como se establece en los artículos 194 y 196 de la Ley 6/2023, de 17 de marzo, de los Mercados de  Valores y de los Servicios de Inversión.

    Queda prohibida cualquier reproducción, total o parcial, de la información contenida en este documento.

    Por AXA Investment Managers Paris, S.A., sociedad de derecho francés con domicilio social en Tour Majunga, 6 place de la Pyramide, 92800 Puteaux, inscrita en el Registro Mercantil de Nanterre con el número 393 051 826. En otras jurisdicciones, el documento es publicado por sociedades filiales y/o sucursales de AXA Investment Managers Paris, S.A. en sus respectivos países.

    Este documento ha sido distribuido por AXA Investment Managers Paris, S.A., Sucursal en España, inscrita en el registro de sucursales de sociedades gestoras del EEE de la CNMV con el número 38 y con domicilio en Paseo de la Castellana 93, Planta 6 - 28046 Madrid (Madrid).

    Advertencia sobre riesgos

    El valor de las inversiones y las rentas derivadas de ellas pueden disminuir o aumentar y es posible que los inversores no recuperen la cantidad invertida originalmente.

    Volver arriba
    Clientes Profesionales

    El sitio web de AXA INVESTMENT MANAGERS Paris Sucursal en España está destinado exclusivamente a clientes profesionales tal y como son Definidos en la Directiva 2014/65/EU (directiva sobre Mercados de Instrumentos financieros) y en los artículos 194 y 196 de la Ley 6/2023, de 17 de marzo, de los Mercados de Valores y de los Servicios de Inversión. Para una mayor información sobre la disponibilidad de los fondos AXA IM, por favor consulte con su asesor financiero o diríjase a la página web de la CNMV

    Por la presente confirmo que soy un inversor profesional en el sentido de la legislación aplicable.

    Entiendo que la información proporcionada tiene únicamente fines informativos y no constituye una solicitud ni un asesoramiento de inversión.

    Confirmo que poseo los conocimientos, experiencia y aptitudes necesarios en materia de inversión, y que comprendo los riesgos asociados a los productos de inversión, tal como se definen en las normas aplicables en mi jurisdicción.