1. Research
This is an excerpt of Asset Allocation: Late Cycle With A Twist, published on April 1, 2018.

Asset Allocation: Late Cycle With A Twist

Authors
Binky Chadha
+1(212)250-4776
Christian Arita
Parag Thatte
+1(212)250-6605

With equities pricing in a 50% probability of an imminent recession which we view as highly unlikely and the rates market continuing to disbelieve that the Fed would go through with its planned normalization we share our asset allocation views.

 Themes: 

  •  Bigger and longer but still just a pullback: not reading too much into it
  • Late cycle with a twist: Growth is unusually strong
  • How high will inflation go?
  • The bond-equity correlation typically falls when inflation rises or the Fed is tightening
  • The dominos that did not fall: positioning in oil and the dollar

Asset Allocation: the cycle lives on
 

 



 

 
With equities pricing in a 50% probability of an imminent recession which we view as highly unlikely and the rates market continuing to disbelieve that the Fed would go through with its planned normalization we share our asset allocation views. Where relative valuation remains at the top of its historical band, we remain neutral and where valuations are low despite strong growth, we are overweight. We maintain our view on the prospects tied to the yen.

We discuss in detail our sector weightings and preferences basing our underlying thesis on valuation, earnings growth and positioning, for instance what to do in a sector where valuation looks fair but the positioning creates a large overhang. Within bonds, we examine the High Yield vs High Grade view with a look to carry and duration.
For important disclosure information please see: https://research.db.com/Research/Disclosures/Disclaimer

© Copyright 2021. Deutsche Bank AG, Deutsche Bank Research, 60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”.

The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made. In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, licensed to carry on banking business and to provide financial services under the supervision of the European Central Bank (ECB) and the German Federal Financial Supervisory Authority (BaFin). In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG, London Branch, a member of the London Stock Exchange, authorized by UK’s Prudential Regulation Authority (PRA) and subject to limited regulation by the UK’s Financial Conduct Authority (FCA) (under number 150018) and by the PRA. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Inc. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product.

22.2.0