Global Asset Outlook at a Glance

Updated monthly! Here’s your quick take on 6 global asset categories from investing experts at Aberdeen Standard. Review these top-line summaries for government bonds, corporate bonds, equities, property and commodities. Then, visit Aberdeen’s Closed-End Fund Investor Center to discover data and insight about global fund opportunities.

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ASSET CATEGORY	ALLOCATION	COMMENT
1	GOVERNMENT BONDS	Negative	We see most government bonds as generally unattractive; yield pick-up is not sufficient. Global monetary policy path has been altered but largely priced now into rates.
US Treasuries	Negative	Recent weak US economic data has prompted dovish comments from the US Federal Reserve. US Treasury yields have fallen significantly over the past few months, near the bottom of a range, pushing them to unattractive levels.
UK Gilts	Neutral	While the economy is slow growing, the Bank of England is still warning about future interest rate increases if Brexit uncertainty is removed.
European Core	Neutral	Eurozone rates remain low; ECB policymakers have become wary of recent European economic weakness, further delaying their tightening monetary policy plans.
European Periphery	Neutral	The spread between peripheral and core European government bonds is quite wide, but we are cautious in view of political risks.
Japan	Negative	Japanese government bond yields are very low compared with other markets, still held down by very strict yield curve control from the Bank of Japan despite the new flexible target.
Australia	Positive	We remain long of government rates as recent Australian economic data shows signs of weakness.
US TIPS	Positive	This market may provide downside protection, as well as a degree of protection against any future inflation surprises.
UK Index Linked	Negative	Recent Sterling strength and uncertainty caused by lengthy Brexit negotiations imply inflation risks are to the downside, while the Bank of England has revised down growth and inflation expectations.
→ Find more information about the Aberdeen Asia-Pacific Income Fund, Inc. (FAX).
2	CORPORATE BONDS	Positive	The spread between corporate debt and government bond yields have widened, offering some selective value.
US Investment Grade	Negative	Spreads are wider but only offer modest protection should the US economy weaken materially.
UK Investment Grade	Neutral	Spreads have widened but still seen as vulnerable to economic shocks or upward surprises to gilt yields.
Euro Investment Grade	Negative	European IG spreads are wider but total return looks modest.
US High Yield	Neutral	US high yield spreads have widened but not sufficiently to suggest attractive returns in relation to the risks.
Euro High Yield	Positive	European data has disappointed, suggesting rate hikes will experience further delays. Furthermore, net leverage in high yield companies has fallen as they have deleveraged. Both these factors are supportive for European HY spreads.
Emerging Market(hard currency)	Positive	Dollar denominated debt is at attractive spreads to Treasuries and all-in yields, despite challenges in some of the larger EM economies.
Emerging Market(local currency)	Positive	A lot of bad news is now priced into local currency debt following sharp currency and spread corrections.
→ Watch a short video on the outlook for the Aberdeen Emerging Markets Equity Income Fund, Inc. (AEF).
3	EQUITIES	Positive	High single digit profit growth globally provides fundamental support at a time of relatively depressed investor sentiment.
US	Positive	Macroeconomic momentum supports this market; the change in the Fed's interest rate path supports growth. We continue to trade the US tactically.
UK	Neutral	The UK trades at cycle low valuations so we are now neutral. Brexit weakness would support the equity market via a lower pound.
Europe ex. UK	Neutral	Economic expansion has faltered recently but valuations are supportive for corporate profits. Currency appreciation and peripheral political risks continue to restrain interest in stocks.
Japan	Positive	Attractive as easy monetary policy and fiscal stimulus are helped by efforts to improve corporate governance, share buybacks and business investment, although yen strength periodically remains a concern.
Developed Asia ex. Japan	Negative	Vulnerable to policy errors in China and worries about trade tensions. When combined with a long emerging Asia position, our underweight position creates a relative value trade that is essentially a short position, against Australia (weak banking sector).
Emerging Market Equity	Positive	Asset class has discounted much of the China trade risks. Valuations have improved and investor positioning is more attractive.
→ Discover how the The India Fund (IFN) seeks to deliver long-term capital appreciation.
4	PROPERTY	Neutral	We have a preference for Real Estate Investment Trusts rather than direct investment in commercial property globally.
US	Neutral	Vacancies are low across most sectors and markets, although the sizeable retail sector is coming under more pressure from the rise in e-commerce.
UK	Neutral	The real estate cycle is at a mature stage and limited further capital growth is expected. Income remains attractive, although risks are elevated should the UK enter recession or political uncertainty surges.
Europe	Neutral	Supported by stronger economic growth and low levels of new supply while valuations are helped by the cautious ECB policy stance. Property market rallied significantly at the start of the year, as rate expectations were anchored.
→ Seek capital appreciation and current income with the Aberdeen Global Premier Properties Fund (AWP).
5	COMMODITIES	Neutral	Commodities are very sensitive to Chinese policy tightening; some commodities such as oil face an uncertain demand/ supply balance.
→ Listen to the dividend outlook with the head of the Aberdeen Total Dynamic Dividend Fund (AOD).
6	CASH AND CURRENCY	Negative	With global interest rates still extremely low we still see better opportunities in risk assets.
Dollar	Negative	We expect US growth to slow and current positioning is extreme so we have downgraded our view.
Euro	Negative	Less attractive than other major currencies, and concerns over Italy and European politics in general.
Yen	Positive	An overweight position in the yen acts as a portfolio diversifier if global activity continues to disappoint.
Sterling	Positive	Brexit concerns have driven sterling lower. Short of a disorderly Brexit, sterling looks undervalued.

Important information:

Aberdeen Standard Investments is a brand of the investment businesses of Standard Life Aberdeen plc, its affiliates and subsidiaries. In the United States, Aberdeen Standard Investments is the marketing name for the following affiliated, registered investment advisers: Aberdeen Standard Investments Inc., Aberdeen Asset Managers Ltd., Aberdeen Standard Investments Australia Ltd., Aberdeen Standard Investments (Asia) Ltd., Aberdeen Capital Management, LLC, Aberdeen Standard Investments ETFs Advisors LLC and Standard Life Investments (Corporate Funds) Ltd.

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