CIBC Asset Management Perspectives—IS RELIEF IN SIGHT?
The intensity of the late-2018 market pullback may seem counterintuitive—isn’t the world economy still in decent shape? Although the global economy remains in expansion mode, market focus has shifted to deteriorating global liquidity conditions and what this could mean for 2019. We believe that global policy-makers, starting with the U.S. Federal Reserve, will increasingly shift from policy renormalization to policy relief.
Fixed Income vs. Equity
: With significant corrections in most markets last year, equity valuation has improved. Strictly from a valuation point of view, equities are currently more attractive than government bonds.
: Emerging markets have become more resilient but remain cyclical and higher octane assets. Given attractive valuation, they should be one of the better performing asset classes once market volatility subsides.
: We are lowering our global bond yield forecasts to account for the clouding global macroeconomic picture. Our revised forecast for 10-year sovereign bond yields is 3.00% (U.S.) and 2.40% (Canada) over a twelve-month horizon.
: The Canadian dollar will remain a fundamentally challenged currency in 2019, limiting its potential upside against the U.S. dollar even once oil prices stabilize and the Fed moves to the sidelines.
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Perspectives Executive Summary
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with Luc de la Durantaye