Following the recent spate of political events, the economic outlook looks far brighter than it did six months ago, mostly thanks to the euro area. However, doubts persist in regards to whether the Trump administration can deliver even modest fiscal stimulus.
Against this backdrop, we believe the US Federal Reserve (Fed) can argue of success especially on the employment side of its dual mandate, while the European Central Bank (ECB) can take comfort on the positive economic momentum to remove further some of their accommodative stance, thereby avoiding the ECB to run into technical constraints on asset purchases.
However, persistently modest inflation combined with US policy uncertainty has depressed the bond market, which is pricing in little in the way of interest rate increases over the coming 18 months.
We believe markets under-price the strength of the recovery and remain overweight growth-sensitive assets, with the Eurozone and emerging markets our preferred equity markets.
Source : AXA Real Estate