Multi-Asset Themes: July Snapshot

As we move into the second half of 2019, risky asset prices and the underlying fundamentals are at a crossroads. Central bank accommodation and falling global bond yields have provided a boost for global equities and risky assets in general, causing them to rally even as economic growth has been slowing. In fact, the Global Manufacturing PMI recently slipped into contractionary territory—below 50—its lowest level since late 2012. While global equities have been resilient, certain commodity sectors have responded more directly to the evidence of slowing growth and softening demand.

From a multi-asset class perspective, we believe it’s critical to incorporate broad themes from the current macro environment as well as more specific drivers of return in order to provide the most nuanced views on asset classes.

Figure 1: Global Views as of 7/23/19

Global Markets Main Drivers 
Positive on DM equities Supportive stimulus, attractive valuations and positive sentiment, albeit earnings strength is weak
Positive on EM equities relative to DM equities Attractive relative valuations and quality, supportive stimulus, partially offset by poor sentiment
Negative on DM bonds Poor valuations and carry continue to weigh down outlook, while sentiment remains positive
Neutral U.S. Dollar vs. DM currencies Poor valuations, sentiment and stimulus, offset by positive carry and growth
Neutral on Petroleum Negative quality, inflation and global growth, offset by positive carry
Positive on Industrial Metals  Strong quality (supply/demand) and sentiment, partially offset by weak inflation and growth
Positive on Precious Metals Positive stimulus and sentiment

* Forecasts based on the dynamic allocation and cross-sectional elements in our proprietary models. The information provided is for illustrative purposes only based on proprietary models. There can be no assurance that the forecasts will be achieved.

Amid these conflicting signals, we have become more bullish on equities and commodities, more bearish on DM bonds, and neutral the U.S. dollar. Specifically, as central banks have moved to a dovish policy stance, stimulus becomes a more bullish driver of equity markets (both developed and emerging), as well as precious metals. The impact from growth indicators has been more diverse. As overall equity markets have rallied, growth has become a negative for DM bond expectations, but as emerging market equities have lagged developed market equities, the impact from growth on petroleum and industrial metals has been more bearish.

Sentiment has shifted considerably, improving our view for DM equities, petroleum, and metals, while contributing to an improved neutral U.S. dollar view. Asset-specific drivers, such as supply/demand balance and seasonality effects in the case of commodities, are also exerting varying levels of influence on the outlook, and capturing their impact allows for more nuanced views within each asset class.

General Disclaimer

Acadian provides this material as a general overview of the firm, our processes and our investment capabilities. It has been provided for informational purposes only. It does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or to purchase, shares, units or other interests in investments that may be referred to herein and must not be construed as investment or financial product advice. Acadian has not considered any reader's financial situation, objective or needs in providing the relevant information.

The value of investments may fall as well as rise and you may not get back your original investment. Past performance is not necessarily a guide to future performance or returns. Acadian has taken all reasonable care to ensure that the information contained in this material is accurate at the time of its distribution, no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of such information.

This material contains privileged and confidential information and is intended only for the recipient/s. Any distribution, reproduction or other use of this presentation by recipients is strictly prohibited. If you are not the intended recipient and this presentation has been sent or passed on to you in error, please contact us immediately. Confidentiality and privilege are not lost by this presentation having been sent or passed on to you in error.

Acadian’s quantitative investment process is supported by extensive proprietary computer code. Acadian’s researchers, software developers, and IT teams follow a structured design, development, testing, change control, and review processes during the development of its systems and the implementation within our investment process. These controls and their effectiveness are subject to regular internal reviews, at least annual independent review by our SOC1 auditor. However, despite these extensive controls it is possible that errors may occur in coding and within the investment process, as is the case with any complex software or data-driven model, and no guarantee or warranty can be provided that any quantitative investment model is completely free of errors. Any such errors could have a negative impact on investment results. We have in place control systems and processes which are intended to identify in a timely manner any such errors which would have a material impact on the investment process.

Acadian Asset Management LLC has wholly owned affiliates located in London, Singapore, and Sydney. Pursuant to the terms of service level agreements with each affiliate, employees of Acadian Asset Management LLC may provide certain services on behalf of each affiliate and employees of each affiliate may provide certain administrative services, including marketing and client service, on behalf of Acadian Asset Management LLC.

Acadian Asset Management LLC is registered as an investment adviser with the U.S. Securities and Exchange Commission. Registration of an investment adviser does not imply any level of skill or training.

Acadian Asset Management (Singapore) Pte Ltd, (Registration Number: 199902125D) is licensed by the Monetary Authority of Singapore.

Acadian Asset Management (Australia) Limited (ABN 41 114 200 127) is the holder of Australian financial services license number 291872 ("AFSL"). Under the terms of its AFSL, Acadian Asset Management (Australia) Limited is limited to providing the financial services under its license to wholesale clients only. This marketing material is not to be provided to retail clients.

Acadian Asset Management (UK) Limited is authorized and regulated by the Financial Conduct Authority ('the FCA') and is a limited liability company incorporated in England and Wales with company number 05644066. Acadian Asset Management (UK) Limited will only make this material available to Professional Clients and Eligible Counterparties as defined by the FCA under the Markets in Financial Instruments Directive.