Investment Strategy January 2016

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ABN AMRO Private Banking

Financial markets have been under severe pressure during the first two weeks of 2016, as worries about China and a further decline in oil prices led to a deterioration in sentiment among investors.

The ABN AMRO Global Investment Committee acknowledges there are significant uncertainties linked to China, given the complex nature of the Chinese economy and the fact that it is going through a transitional phase. The committee, however, believes current market sentiment to be at odds with global economic fundamentals. Therefore, and despite recent market turmoil, the Global Investment Committee decided to maintain the existing asset allocation at its meeting on 14 January 2016. The asset allocation continues to call for a moderate overweight position in equities and a strong underweight position in bonds.

  • Fears of a ‘hard landing’ of the Chinese economy do not seem warranted; our economists consider a ‘soft landing’ – even when it is a bumpy one – to be the base scenario.

  • Recent equity market upheaval seems to be strongly driven by sentiment; we continue to expect modest economic growth and an improvement in global corporate earnings momentum as 2016 progresses. We therefore maintain our modestly positive stance on fairly valued equities.

  • We remain underweight in bonds; the only areas that are able to (slightly) beat cash are peripheral government bonds and corporate bonds.

  • The price of oil is expected to stabilize in 2016; we hold on to our overweight positioning in commodities.

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