Market commentary Bellevue Asset Management

"We are confident about stocks, but the possibility of a growth shock cannot be ruled out"

Bellevue Asset Management / Market commentary Bellevue Asset Management: "We are confident about stocks, but the possibility of a growth shock cannot be ruled out" . Processed and transmitted by NASDAQ OMX Corporate Solutions. The issuer is solely responsible for the content of this announcement.

The experts at Bellevue are forecasting a continuation of monetary policies aimed at stimulating economic activity, therefore providing an ideal environment for stocks and non-sovereign bonds. That said, there is still some risk of a substantial disruption, including a possible growth shock should the Chinese Renminbi be devalued. 

Conditions on the world's equity markets have settled down after the turbulent start to the new year and Lucio Soso, Lead Portfolio Manager of BB Global Macro Fund (ISIN B-EUR LU0494761835) of Bellevue Asset Management, does not expect to pick up volatility again. The BB Global Macro team has drawn up a central case scenario with a 50% probability of occurrence projecting slow growth in the global economy and a continuation of the extremely accommodative monetary policies by central banks. "When we have these kinds of conditions, equities and corporate bonds perform the best," Soso says.

Bellevue's somewhat negative scenario is less likely (probability of occurrence: 25%). In this scenario, the credit bubble in some emerging markets would continue to affect global financial markets. Although the Bellevue experts predict that these credit crises will remain local in scope, the situation nevertheless represents a threat for high-risk investments. If the credit crises lead to declines in bond prices, the fund managers of BB Global Macro plan to buy bonds from emerging markets (such as Brazil) to take advantage of this scenario.

The negative scenario is even grimmer, but with the same probable likelihood (25%). If it becomes reality, there would be a growth shock that could send equity markets into a bear market. One possible cause of an economic slowdown could be a devaluation of the Chinese Renminbi. Under such a scenario, Chinese demand for foreign goods would suddenly drop while global companies would be confronted with heightened competition from Chinese products. China's total level of debt has increased sharply since 2007. A credit crisis would increase the pressure for a devaluation even further. "We continue to be concerned about a possible slowdown in the Chinese economy and a subsequent devaluation of the Renminbi," Soso says. The Chinese currency was sold short in March as a hedge to the equity strategy.