AXA IM said it recommends invests park proceeds from global and European equity allocations reductions in cash due to a ‘tug of war’ between geopolitical risk and economic recovery.
Chief strategist Franz Wenzel said that ‘dynamic growth momentum’ in the the US and China, is being undermined by the performance of Europe, particularly in Italy and France, as well as the Russia-Ukraine crisis.
Wenzel is also concerned about the potential impact on equity markets of the ongoing events in the Middle East, and says it would be ‘unwise for investors to ignore the ‘rising risk’ of the situation in the region escalating enough to disrupt world markets.
On the fixed income side, Wenzel notes that monetary policy remains ‘ultra-accommodative’ globally and low inflation in Europe is creating expectation of a large ECB QE program being launched.
AXA therefore has a preference for Bunds over US Treasuries and Wenzel recommends investors reduce duration, particularly in high-yield.
