Nonetheless, we expect that inflation will resume its gradual downward trend to allow the ECB and Fed to cut rates this summer. Stock and credit markets are priced for perfection, but we do not fully sympathize with current valuations, as weaknesses in many economies remain. Indeed, even though it’s firmly risk-on, downside risk are not fully gone. We added to curve steepeners and prefer highly rated SSAs and covered bonds over investment grade and high yield credit.
“
We do not fully embrace the growth euphoria
In our previous outlook ‘Staying Power’ we argued that markets were catching up with our ‘there is value in bonds’ view. Nonetheless, we mentioned that fundamentals would be important for retaining positive sentiment in the bond market. In the US, the economy has been defying the slowdown seen in Europe and China, supported by vigorous consumption, fiscal support and a slow feed-through of higher interest rates. Europe remains in economic stagnation, but the robust labor market keeps it afloat.
We acknowledge that recession risks appear to have eased for now, but we do not fully embrace the growth euphoria. Economic weaknesses remain and geopolitical events, such as the European elections this spring and the US presidential elections in November, loom. In our base case we expect the Fed and ECB to cut this summer.
Download the publication
Important information
The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong. This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions. The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.