Download full article

June investment strategy: Emerging markets - dollar dolour

Emerging markets hit by a combination of shocks

  • A number of idiosyncratic surprises and a rebound in the US dollar have together managed to interrupt the emerging market (EM) rally which started in 2016
  • We remain constructive on the asset class as the macroeconomic backdrop in most countries looks solid while assets are attractively priced and the bulk of capital outflows, have hopefully, already taken place
  • We do not expect that the problems troubling some developing economies will spur-on an overall EM systemic debacle. The key risk in our view is a stronger than anticipated appreciation of the US dollar

Macro: our positive conviction is unchanged but risks are tilted to the downside

  • From a demand perspective, we maintain our view that the Eurozone can keep growing at 2% this year and next. Despite the legacy issues of the prolonged downturn i.e. structurally higher unemployment, labour market slack remains ample
  • We will however carefully watch incoming soft and hard data, as several regions (EMU, Japan and some EMs) are facing a month of truth

Asset allocation: Downgrading Eurozone equities

  • We maintain our positive view on equities, relative to fixed income and have a short duration bias
  • After the strong outperformance of Eurozone equities, we have downgraded the region as macro data continues to disappoint, which is weighing on market sentiment and earnings’ expectations. In addition, political risk has risen in Italy
  • The European Central Bank’s surprise announcement to keep interest rates unchanged until at least September 2019 has led us to downgrade our EUR/USD target to 1.20 by end 2018

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.

Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

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