Investment Strategy - Stocks continue to be preferred

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Despite market turbulence, economic and company fundamentals remain solid. The ABN AMRO Investment Committee continues to prefer the relative attractiveness of stocks over bonds. Within alternative investments, commodities are favoured over real estate and hedge funds.

For a while now, as the US economy surged, Europe slowed and specific emerging markets experienced real difficulties, we have remarked that risks were increasing. These risks included Britain’s departure from the EU, the unpredictability of the Trump administration, US interest rate hikes, trade conflicts, emerging markets contagion and Italian politics.

Some of these uncertainties are now entering a new phase. The Brexit decision, for example, is now less than six months away; and the US midterms are in less than four weeks. The Italian budget came in above EU guidelines a week or so ago and the credit-rating agencies are scheduled to review the situation in Italy at the end of October. We are also further into higher interest rates in the US. The Federal Reserve has kept on its well-signalled path, hiking rates by 25 basis points every quarter, with the last hike in September. And, while the US has largely resolved trade issues with North America and Europe, the situation with China is still ratcheting up.

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