Speaking on a webcast on Monday, Invesco multi-asset product director, Georgina Taylor, explained that, when global growth isn’t strong other factors become more important.
One of these factors is how competitive a country is, compared to its trading partners, an idea the group is expressing through currency trades.
It has, during the quarter bought exposure to the Japanese yen relative to the Korean won because it expects the yen to stabilise in the coming months, while it expects Korea’s won to weaken further as the country tries to make its exports more competitive.
The second new, relative trade implemented during the quarter, Taylor said was the difference between Australian and Eurozone interest rates.
She said: “relative economic themes and risks are not being fully priced into bond markets at the moment.” If one looks at unemployment figures in the US, eurozone and Australia: US unemployment has fallen significantly, eurozone unemployment remains high but the direction of travel is down, but in Australia unemployment is on the rise as the commodities cycle continues to falter.”
But, while the US/Australia relative 10 year swap rate has come down significantly, the difference between swap rates in the Australia and the eurozone remains fairly wide, a situation Invesco expects to narrow over time.
The third idea has been to gain exposure to Japanese equities by buying put options. “We see there being a line in the sand through which Japanese equities are unlikely to fall.
“There are some fundamental improvements coming through in Japan and we continue to look for areas that stand to benefit from policy support,” Taylor said.
During the the quarter, the group also removed a number of exposures, including UK versus Swiss equities, US duration, US equities.
