Asset Allocation January 2016

06 Jan 2016


  • Rocky start of the year for risk assets
  • Desynchronised growth in 2016
  • Underweight EM equities closed; now underweight EM debt in local currency


2015 was a positive year, at least from the perspective of a European investor and as long as the currency exposure was left unhedged. Global equities rose by 6.6% in euros, with Japan in the lead (+20.0%), followed by the US (+8.7%) and Europe (+5.0%). Including currency moves, emerging equities lost 7.5%. Real estate, which gained 12.5%, and global bonds (up 7.9%) outperformed global equities. Due to the steep drop in crude oil prices, commodities slumped by 14.6%. From a US perspective, things looks quite different as the US dollar ained against the euro and many other currencies. Among the broad asset classes, only real estate posted a gain in US dollars at a mere +1.0%. 2015 was also a year with two different faces: a modest, low-volatility uptrend through May and a much rougher second half. Will this change in 2016? The year had a rocky start. We expect desynchronization to remain a theme for investors
throughout the year.


Growth was spread unevenly in 2015. The US had its ups and downs, but domestic growth was robust. Eurozone growth held up well as the euro depreciated versus the US dollar, oil prices fell and austerity faded. Growth was not strong in Japan, but a tighter labour market and small gains in nominal wages were positive for consumers. Growth slowed in China; Russia and Brazil experienced deep recessions. For 2016, we expect growth to remain at or slightly above trend in the US, driven by a robust labour market and domestic consumption. There are risks though. How will the economy cope with the strong US dollar when the manufacturing sector is already struggling?

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