2023-11-13 06:05:00
Bourse
By Romain Dion
Published on 11/13/2023 at 07:05 – Updated on 11/13/2023 at 07:05
The head of asset allocation at Invesco has reduced his exposure to stocks. He favors cash and good quality private debt.
Paul Jackson at Invesco sees a contraction in the money supply in the United States, Europe and Japan. Only China is bucking the trend. The management company’s head of asset allocation therefore believes that the risk of recession is higher today than at the start of the year.
The excess savings built up during the Covid pandemic have largely been consumed, leading PMI indicators have been falling in industry for two years and services PMIs have taken a nosedive in recent months.
Inflation has fallen significantly, but the decline might be less rapid. The war in Ukraine and new tensions in the Middle East add to market volatility.
Risk of recession
Result: its asset allocation has become more defensive. He anticipates a “resteepening” of the yield curve in 2024 (lower short-term rates by central banks and maintaining higher long-term rates), unfavorable for stocks. Paul Jackson prefers cash and good quality corporate bonds (“Investment Grade”).
He is more cautious on riskier so-called “High Yield” bonds exposed to a rise in default rates.
Sovereign debt remains “underweighted” in its asset allocation, but it is gradually returning to American debt in view of higher yields. The ten-year yield on government bonds once once more becomes higher than that on stock dividends, which makes public debt more attractive.
American and Japanese stocks are “underweighted”, the expert favoring Chinese stocks and those of emerging countries which have become very cheap. The expert is “neutral” on European stocks due to their moderate valuation.
Productivity gains
Commodities, industrial metals, gold and oil, are also “underweighted”. On the other hand, Paul Jackson believes that listed property companies are pricing in a lot of bad news and are offering attractive returns once more.
In the longer term, the growing use of generative artificial intelligence might have favorable effects on growth and productivity, as was the case with the arrival of the Internet between 1997 and 2005. Which would push real rates ( excluding inflation) up, gold down and industrial metals up.
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#Placements #Paul #Jackson #defensive