BNPP AM: Asset Allocation Quarterly July 2019

Summary

Fragile goldilocks’ firming up – We continue to envisage ‘not too hot and not too cold’ economic conditions in our base case scenario, but clearly, there are risks that could destabilise this sweet spot.

Macro data – softer, but stabilising – Since the Q4 soft patch, the macroeconomic backdrop has stabilised. Combined with low inflation, softer, but stable growth should be enough for ‘goldilocks’ to persist. US domestic data have held up well.

Central banks – back in full swing – Recent weeks have seen several flashpoints, with monetary policy by the US Federal Reserve and the ECB as well as in China edging more into dovish territory. All else equal, this should support risk assets, depress real rates and revive inflation breakeven rates.

Trade-war risks – Likely continue to oscillate around a medium to long-term trend of de-globalisation. Short term, the trade truce between the US and China at the G20 meeting is supportive.

For the full report please see the attached pdf.