· The Fed expected to hike in December and March.
· The BOJ and ECB will remain on hold for the next 12 months.
· Bond yields to hike for the next two quarters.
Phoenix Wealth Management (PWM) is positive on Japanese and developed Asia-Pacific equities over the next six months due to low valuations in Japan and a bullish outlook for Hong Kong and Australian shares. But PWM will maintain a slightly underweight stance on global equities amid continued uncertainty in global growth, geopolitics, and uncertainty surrounding the outcome of the U.S. mid-term election and its impact on the U.S. economy.
“We have been cautious on global equities since our September meeting, and while they have risen to a record high through September 28th, global bonds have risen 10%,” said Joel Harlin, chief investment officer. “Our new macro-backdrop scenario continues this moderately negative view of global equities, particularly in Europe, but we are bullish on Japanese and developed Asia-Pacific equities.”
With regards to the outlook for monetary policies by central banks, PWM said the U.S. Federal Reserve is expected to hike in December and March as growth is strong enough to handle the increase, but, Bank of Japan will remain on hold for the next twelve months, with the continuation of their QE programmes, but with no new policies.
For bonds, PWM CEO Mr. Stan Garner said bond yields will hike for the next two quarters as its new scenario expects continued strong economic growth in the U.S. The committee forecasts the U.S10-year Treasury yield to be at around 3.18% with those for 10-year JGBs at around 0.15% and 10-year German Bunds at 0.49%.
As for currencies, the yen is expected to stabilize around 112 against the U.S. dollar at the end of December on views that the Fed will hike rates more than once. For the euro, the ECB is not expected to make any major QE moves and the region will continue its high current account surplus, which could prompt capital repatriation. The committee expects the euro to stand around US $.16 at the end of December.