The United States is proving to be the region that is most resistant to the global economic slowdown, according to NN Investment Partners' analysis.
The NN IP Business Cycle Indicator shows the US at 10.94, versus 2.26 for the eurozone and -0.06 for emerging markets on a scale of plus/minus 30.
The NNIP global business cycle indicator measures the expected path of the business cycle by combining more than 70 survey-based macroeconomic indicators from all regions, also called soft data, like consumer confidence, business confidence, purchasing manager indices (PMIs) etc. Region-specific indicators follow the same principle and, are designed to time the turn in economic environment in advance of actual GDP numbers.
The US economy, despite slowing down, is still holding up much better than the rest of the world. This relative strength makes us more constructive on the region on a relative basis.
In Europe, we expect a challenging macroeconomic environment and geopolitical uncertainties while emerging markets are the most affected by the trade conflict. For now, central bank actions appear to be only partially offsetting the escalating geopolitical and trade uncertainties against a deteriorating global macroeconomic backdrop.
NN IP calculates there is a 75% chance that US yields will compress over the next month justifying an overweight position in US Treasuries. Its multi-asset team has a small overweight in EUR and USD investment grade bonds while avoiding EUR high yield paper because of the risks it identifies.
It is neutral emerging market bonds generally because of the trade risks the region faces.
Niels De Visser is senior portfolio manager, Multi Asset, NN Investment Partnership