In our latest asset allocation monthly, we examine the critical issues investors should consider when fine-tuning portfolio allocations.
The ebb and flow of US real interest rates, inflation expectations and the future level of policy rates remain the principal drivers for asset returns globally.
In fixed income, the most significant change in the market dynamic was the balance between the contribution from real yields and that from inflation expectations.
In equities, after the first positive vaccine results in November, cyclical and small-cap stocks led the gains in US and global equities. With the passage in Congress of the latest multi-billion dollar US stimulus package, the value style took the lead over growth. Looking ahead, we expect cyclicals and small caps to continue to outperform, but see greater near-term potential for value stocks.
The 150bp increase in US Treasury yields since last June has yet to pose a problem for equities, though there is a worry that further rapid increases could prove too much for them to bear. We do not, however, see a significant risk on this front.
[shortcode_call_to_action text=”Asset allocation monthly – Ebb and flow” link=”https://docfinder.bnpparibas-am.com/api/files/26B371F4-DCCB-4741-BE99-4A95C2735CF2″ /]
