In last month investment strategy, we highlighted how dwindling confidence in US policy-making, coupled with upbeat European growth momentum, had reshaped the market outlook. This month we expect little change in market sentiment, as the focus turns to the upcoming coalition negotiations, following the German election. Overall, we believe markets will continue to look for risky assets, where there are still gains to be reaped, although we would advise caution as risk edges up. In a nutshell, we argue:
・Global economic growth momentum is upbeat and should continue to lift market expectations.
・ Political uncertainty is preventing any irrational exuberance, with few policy developments in the US, Europe constrained by the German political outlook and little progress on Brexit.
・ On-going monetary policy normalisation is moving at a snail’s pace in the US and the euro area, and as such adds an extra layer of caution on market behaviour.
Source : Axa Real Estate