Back

April Investment Strategy: Ominous prospect of a trade war shouldn't derail global economic growth

April Investment Strategy: Ominous prospect of a trade war shouldn't derail global growth

Research & Investment Strategy

Key points: 

  • The engines of global growth are still running and despite some disappointing first quarter data from the US and Europe, we remain confident in our outlook
  • Concerns about protectionism have risen, given the on-going rhetoric between the US and China. For now though, this seems to be more about tactics on how to start negotiations, with the US administration using tariff threats as leverage. However the worst case scenario - a trade war breaks out - cannot be dismissed and such an outcome could have a significant impact on the overall global economic and policy outlook
  • Fundamentals as well as technical factors continue to be supportive for pro-risk assets and we have made two important changes to our asset allocation. First, we have reinstated an overweight position in US equities and second, we have shifted our long inflation exposure from the US to the euro area.

Recent data, coupled with the trade war rhetoric, could start weighing on the solid growth momentum and optimism which have prevailed over the past six months. As previously highlighted, the economic backdrop has arguably been almost too good to be true, and we have warned about complacency and the need to remain alert to possible risks or disruption to the global expansion. So where do we stand right now? We still believe that fundamentals remain supportive. But equally, it is fair to say that should the current situation in regards to trade and protectionism deteriorate, both business and consumer confidence would take a hit. However we are not there yet, which is why we remain cautiously optimistic and have a moderate risk appetite but we are continuing to closely watch out for any potential threats and obstacles. 

Download Laurence Boone's full commentary 

DISCLAIMER

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

This document has been edited by AXA INVESTMENT MANAGERS SA, a company incorporated under the laws of France, having its registered office located at Tour Majunga, 6 place de la Pyramide, 92800 Puteaux, registered with the Nanterre Trade and Companies Register under number 393 051 826. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

 

© AXA Investment Managers 2018. All rights reserved