WHAT YOU NEED TO KNOW IN
2Q MOVING INTO 3Q
At The Investor, our view on global markets for Q2 moving into Q3 is a more
constructive view than our traditional
bullish stance on the various risk assets,
and our conviction levels have waivered.
Asset pricing have deviated: equity valuations have expanded while real bond yields
have risen to adjust to more “normal” policy setting ahead. We are now only about
12 months away from a US and UK rate
hiking cycle, a different type of monetary
regime than the one we have grown accustomed to. Notwithstanding the weatherrelated shocks in Q1 slowdown we continue to look for an acceleration in global
growth, led by stronger activity in the US
and Europe. Concurrently, reliance on
extraordinary monetary accommodation
will decline as we progressively move away
from zero interest rates.
Regional variations in the speed of normalisation will have implications for asset
prices, with relative value decisions likely
to assume greater significance.
Fundamentals remain supportive of equities. From a frontier perspective we are
bracing ourselves for weaker currencies
and decrease in commodities pricing. Although gold could rally given the range of
political and economic events expected in
Q3.
Snapshot of Global
MARKETS
Forex
GLOBAL CURRENCIES
G
lobal forex markets
have
performed quite well in
2Q. Giving that most EU
and US economies are currently winding down the
Quantitative Easing programs.
The British Pound performed relatively well
against major global currencies and this trend is
expected as the British
economy gains momentum into Q3.
Debt
DEBT MARKETS
G
lobalization and the
rise of different types
of
European bond markets
including a European corporate bond market have
drastically changed the opportunities for European
bond investors and everyone else.
European investors are increasingly looking toward
the African continent for
debt deals.
Equities
EQUITIES & STOCKS
T
he second quarter
corporate earnings
season got off to a quiet
start, withinvestors taking
cautious positions ahead
of the major reports due
later in July .
Higher risk technology
stocks are forecasted to underperform, while defensive utilities and telecoms
to outperform.
Global
Commodities
COMMODITIES
O
il prices tumbled
on the prospect of
higher Libyan output
joining ample global
supplies and as traders
continued to book profits
from a sharp rally a week
ago. Gold prices shuffled between gains and
losses, amidst violence in
Ukraine and the Middle
East against the possibility
of a stronger-than-expected US jobs report. Copper
rose 5.9 % the most since
September 2013.