Mark Dowding, co-Head of Developed Markets at BlueBay AM, has issued his latest market insight in which he focuses on a more positive outlook for markets, as well as the recent performance of credit and sovereigns. Key points include:
- Market outlook: Investors have endured a painful year with almost all global equity and fixed income indices delivering negative returns on a year-to-date basis through the end of last month. However, we see reason to reassert a generally constructive view on global growth.
- Credit: Corporate bonds enjoyed a better week as equities stabilised from the elevated volatility experienced during the course of October. European credit also benefitted from declining volatility in the periphery and the reversal of a ruling on Spanish banks.
- US yields: BlueBay continue to look for the US economy to outpace Europe and for US yields to rise even as those in the eurozone remain well anchored by ultra-low cash rates.
- Bunds: BlueBay believes Bunds should continue to trade in a range even with 10-year Treasuries more likely to trade in the range 3.25%-3.50% come the year-end.
- Emerging markets: Sentiment in emerging markets has continued to recover in the past few weeks. Chinese PMI data was softer than expected, but anticipated benefits from policy easing steps are seen stabilising the trajectory in the short term.