One week / one topic: Central bank announcements

What happened?

We had dovish news as the he Fed clearly signalled that it wants to cut rates, while Switzerland is already cutting rates.

At the same time, the Bank of Japan finally caved and raised rates for the first time since 2007 - while Turkey surprised everyone with a 500bps hike and reinforced its newfound policy credentials.

On balance, markets remain convinced that the direction of travel remains towards lower rates – leaving the reflation trade alive and well for now:

Our observations

• Fundamentals: Monetary policy turned even more supportive, especially given the Fed’s stance: the inflation emergency has (prematurely?) been declared over and central banks are once again focused on protecting growth. The “Fed put” is back.

• Price action: Balanced portfolios remain in a convincing uptrend, with Equities particularly strong and Bonds having seemingly bottomed.

• Investor beliefs: “No landing” consensus remains entrenched, leading to a clear reflationary bias. Nonetheless, we are not detecting clear signs of it being overdone yet.

So what?

The odds of a continued reflationary trend for both Equities and Bonds seem to have increased at the margin.

Our portfolio positioning remains constructive, yet we still believe that diversification is key to achieve fund objectives and manage volatility over time.