« En Marche! », that’s an easy catch for brokers and a good way to have investors be more pro-risk in their asset allocation now that the political landscape has cleared for the best, thanks to Macron’s win at the French presidential election…
Per Morgan Stanley’s strategists (Cross Asset Playbook):
« Macro Outlook – Synchronous Global Growth
As political risk in Continental Europe abates for now, focus turns back to synchronous global data and easy financial conditions. We believe a positive first derivative for global growth (a synchronised recovery) will matter more for now than weakness in some second derivatives (China PMIs and PPI peaking). Growth, valuations and sentiment extend further, battling against unfavourable seasonality.
Market Playbook – Late-Cycle
Late-cycle environments can be profitable for equity investors and valuations can overshoot. Japan is at a critical juncture for wage growth and is a good place to set reflation trades (higher breakevens, weaker currency, stronger stocks).
Strategy Changes and Key Trades
We upgraded US equities to E/W on the back of our new Chief US Equity Strategist’s initiation on S&P with PT of 2700. Our favourite equity region remains Japan, but we think that the current late-cycle environment supports equities over credit generally. We take profits on our CADMXN short and take EUR hedges off after the French election. We move the CMBX short up the capital structure. »