巴克莱 我们看到的市场环境

ContntsofthisdocumntarfornonUSrsidntsonlyWalthandInstmntManagmntImportantInformation:PlasnotthatthcontntsofthisdocumntarintnddfornonUSrsidntsonly.InFocus:MarktsaswsthmChina–isitdiffrntthistim?“Historynrrpatsitslfbutitrhyms”(Unknown)RcurringoutflowsThisyarmarksth20thannirsaryofthAsianFinancialCrisis,whnthcapitulationofthThaicntralbankonthbahttriggrdafinancialandconomiccollapsinthrgion.Topolicymakrs,thCrisislaidbarthdoubldgdnaturofopningon’sconomytothglobalfinancialsystm.Ononhand,forigninstmntwasinstrumntalinpullingthspriouslyundrdlopdconomisintothmodrnworld.Onthothr,rlianconforigncapitalxposdthsconomistothcapriciouswhimsofthglobalfinancialmarkts.ThCrisiswasaprfctxamplofthdamagthatcanbdonbycapitaloutflowsonctrustislostamongitsforigncrditors.InthstilllakingChinscapitalaccount,manyinstorsstillsthprospctforamormodrn,butnmoricious,casstudy.Wxplorsomofthrasonswhywstilldisagr.Historically,capitaloutflowshurtanconomythroughtwochannls–currncydprciationandxtrnalfinancing.Thformrmaksithardrfordomsticfirmstopayoffthirxtrnaldbtwhilsimultanouslydcrasingthattractionoffundingsuchfirmsforxtrnalinstors.Thisladstoaslfprptuatingfdbackcycl,whrawaofdomsticcorporatdfaultslowrsconfidncinthconomy,whichladstongratrcapitaloutflows,andsoforthRacclratingcapitaloutflowshabnforcingthPopl’sBankofChina(PBoC)todishoutincrasingsumstodfnditscurrncy–laingthcountry’sadmittdly17Fbruary2017ForEMEAandAsiadistributiononlyInsid(clicktojumptosctions)RcurringoutflowsThisyarmarksth20thannirsaryofthAsianFinancialCrisis,whnthcapitulationofthThaicntralbankonthbahttriggrdafinancialandconomiccollapsinthrgionBackto2015?W’bnhrbforofcours.Lastyar’smarktpanicwaspartlysparkdbyworrisofamassiyuandaluation,asinstorsfardthPBoCwouldntuallybucklundrthwightofcapitalflingaslowingconomyStructuraloutflowsAscapitalaccountlibralisationadancsinthlongtrm,wcanxpctmorofChina’sdomsticwalthtofinditswaytothrstofthworldRisksWhilxcssicapitaloutflowswrspciallydamagingforthorlragdAsianconomisof1997,thisscnariomaynotquitfitthChinaoftodayInstmntconclusionsOrall,thriskstothChinsconomyfromcapitalflightarstillrlatilycontaindMarktcalls–summarySlctdriskstoouriwsAsstclasssummaryLatstmarktdataKymacroconomicprojctionsThcasforinstingFigur1:PBoCFXrsrsFigur2:PurchasingmanagrindicsSourc:Datastram,BarclaysSourc:Datastram,Barclays1.01.52.02.53.03.54.04.5Mar10Mar12Mar14Mar16PBoCFXRsrs($trillions)4850525456586062Fb11Fb12Fb13Fb14Fb15Fb16NonmanufacturingManufacturingChinaNBSpurchasingmanagrindicsInFocus17Fbruary20172stilltowringFXrsrsatthirlowstllin5yars(Figur1).Thauthoritishaalsorsponddbyimplmntingasrisofcapitalcontrolmasurs,includingtightrapproalprocdursforforignacquisitionsbyChinscompanisandhighrhurdlsforforxpurchassbyindiiduals.Backto2015?W’bnhrbforofcours.Lastyar’smarktpanicwaspartlysparkdbyworrisofamassiyuandaluation,asinstorsfardthPBoCwouldntuallybucklundrthwightofcapitalflingaslowingconomy.Thistimhowr,domsticconomicconditionsarlookingmuchprkir.Thlatstracclrationinoutflowsistakingplacamidstapickupinbusinssconfidncsurys(Figur2),risingfactorygatinflation(Figur3),andstadyconsumptiongrowth(Figur4).Sofar,quitymarktshaalsormaindcalm,andfwarpricinginanysignificantyuandaluation.Simplyput,thisdosn'tlooklikanconomyfromwhichrsidntswillbdspratlyacuatingthirprciouscapital.China’sofficialntcapitaloutflowscanbdiiddintothrmaincomponnts–dirctinstmnts(whichtndtoblongtrmstratgicinstmntsnddtofacilitatit’slongrungrowthpotntial),portfolioinstmnts(whichconsistofquityanddbtscuritypurchassbysmallrinstors),andothrinstmnts.PriouslyinInFocus–China’scapitalflight,whashownthatthoutflowsthatsparkdsomuchpanicarlylastyarwrmainlycausdbyChinsdomsticntitispayingdownthirforigndnominatddbts,rathrthanmasscapitalflight.Lookingatthofficialbalancofpaymnts(BoP)figursthistim,wcansthatthatcapitaloutflowshainddracclratdinQ3Figur3:ProducrpricinflationFigur4:RtailsalsgrowthSourc:Datastram,BarclaysSourc:Datastram,Barclays40200204060No00No04No08No12No16PPIPPImanufacturingPPIrawmatrialsindustryPPIminingindustryyaronyargrowth(%)0510152025Jun01Jun06Jun11Jun16Rtailsalsyaronyargrowth(%)Figur5:BrakdownofChinsntcapitaloutflowsSourc:Datastram,Barclays20015010050050100150200Fb02Fb04Fb06Fb08Fb10Fb12Fb14Fb16OfficialntcapitaloutflowsFinancialdriatisOfficialntcapitaloutflowsPortfolioinstmntsOfficialntcapitaloutflowsOthrinstmntsOfficialntcapitaloutflowsDirctinstmntsOfficialntcapitaloutflowsTotal($,billions)Thisdosn'tlooklikanconomywhrrsidntswillbdspratlyacuatingthirprciouscapitalInFocus17Fbruary20173(Figur5).Aswasthcasin2015,thoutflowsarstillconcntratdwithinth‘othr’instmntscatgory,particularlyloansandtradcrdit(Figur6).Onthsurfac,thcurrntpacofcapitaloutflowssmrymuchlikacontinuationofwhatwhaalradysn–domsticntitisdlragingandpayingoffthirforigndnominatddbt.Butaclosrxaminationofthdatapointstowardsasubtldiffrnc.Whilthstockofxtrnalliabilitiswasfallingin2015,China’sxtrnalliabilitisharmaindstabl,indicatingthatChina’sstockofxtrnaldbtisn’tbingpaiddown(Figur7)–anobsrationfurthrcorroboratdbythBoPdata.Backin2015,changsinth‘othr’instmntscatgorywrdrinmorbythliabilitissid(firmswrpayingdownthirforigndnominatddbtsliabilitis).Thistim,changswrdrinmorbythasstssid(Figurs8to10).Essntially,thrhasbnanaccumulationinxtrnalassts,rathrthanadrawdowninxtrnalliabilitis.Domsticntitishabnxtndingloansandtradcrdittoforignrs,whilalsoincrasingthircashholdingsorsas.It’sstillunclarwhat’sdriingthisbhaiour,althoughthiscouldstillbarflctionoftmporaryfactors.Forxampl,somChinsxportrsmaybpurposlyxtndingmorforignloansortradfinancinanticipationofanapprciatingUSdollar.StructuraloutflowsGinthsdlopmnts,it’sliklythatthChinsauthoritiswillcontinutorlyoncapitalcontrolstostmxcssicapitalflight,whilmanagingaslowdprciationofthyuanortim.Figur6:BrakdownofChinsntcapitaloutflows–othrinstmntsSourc:Datastram,Barclays20015010050050100150Fb12Fb13Fb14Fb15Fb16OthrinstmntsccydpositsOthrinstmntsloansOthrinstmntstradcrditOthrinstmntsassts,accrciablsOthrinstmntsothrsOthrinstmnts($,billions)Figur7:NtxtrnalliabilitisFigur8:Othrinstmnts–loansSourc:Datastram,BarclaysSourc:Datastram,Barclays0100200300400500600700800Mar11Mar12Mar13Mar14Mar15Mar16LoansCcydpositsTradcrditIntrnationalinstmntpositionliabilitis(billionsUSD)10050050100Fb11Fb12Fb13Fb14Fb15Fb16Assts(Ngatidnotsaris)LiabilitisNtOthrinstmntsloans($,billions)China’sstockofxtrnaldbtisn’tbingpaiddownInFocus17Fbruary20174So,willcapitalcontinutoflowoutfromChina?ThrisidnctosuggstthatChina’ssaingsarstructurallyundrinstdinorsasassts.Asof2015,China’sxtrnalassts(xcl.cntralbankrsrassts)standatonly25%ofGDP.ThisisfarlowrthanitsAsianPacificanddlopdmarktprs(Figur11and12).ThisdistortionismainlyarsultofChina’scapitalaccountcontrolsrstrictingthpriatsctorfromfrlyinstingabroad,whichinturnfunnlscaptiwalthtowarddomsticasstssuchasralstatandwalthmanagmntproducts.Thimplicationisthatthrmaybalotofpntupdmandfororsasassts,asChinsrsidntssktodirsifyhousholdwalthawayfromdomsticallybiasdportfolios.Sofar,thisdmandhasn'tbnthmaindrirofoutflows,butascapitalaccountlibralisationadancsinthlongtrm,wcanxpctmorofChina’sdomsticwalthtofinditswaytothrstofthworld.RisksWhilxcssicapitaloutflowswrspciallydamagingforthorlragdAsianconomisof1997,thisscnariomaynotquitfitthChinaoftoday.China’sxtrnaldbtamountdtoabout10%ofGDPin2015,alowrratiothanirtuallyanyothrmajormrgingmarkt(Figur13).Moror,China’sntforignasstsamountdto$1.7trillionatthndof2016,implyingthatithasnoughforignasststomorthancorallofitsforignliabilitis(Figur14).China’sxportsaralsomorthansufficinttocoritsxtrnaldbtsricingcosts.Inshort,thcountryisnotsubjcttothtraditionalrisksassociatdwithcapitalflight.Figur9:Othrinstmnts–tradcrditFigur10:Othrinstmnts–ccydpositsSourc:Datastram,BarclaysSourc:Datastram,Barclays8060402002040Fb11Fb12Fb13Fb14Fb15Fb16Assts(Ngatidnotsaris)LiabilitisNtOthrinstmntstradcrdit($,billions)15010050050100Fb11Fb12Fb13Fb14Fb15Fb16Assts(Ngatidnotsaris)LiabilitisNtOthrinstmntsccydposits($,billions)Figur11:Chinsxtrnalasstsas%ofnominalGDP,rlatitoAsianPacificconomisSourc:IMFIFS,Barclays020406080100120140160180BGDPKLKINDINCNPHPTHKRNZMYSAUSJPExtrnalasstsminusrsrsas%ofnominalGDPThrisidnctosuggstthatChina’ssaingsarundrinstdinorsasasstsInFocus17Fbruary20175InstmntconclusionOrall,thriskstothChinsconomyfromcapitalflightarstillrlatilycontaind.Itisuncrtainhowffctithrcntraftofcapitalcontrolswillb–China’sconomymaybtooporousandcomplxforauthoritistodomuch.Ofcours,afurthrrosionofthPBoC’scoffrswillgtprobablygtinstorpulssracingagain–anothryuandaluationbasdmarktpanicwillnodoubtbpainfultondur,butitwillliklypassquicklyinouriwforthrasonsdscribdabo.Thburgoningglobalconomicrcoryisliklythmorimportantthingforinstorstofocusonrightnow,whichispartofthrasonwhywstilllikbothmrginganddlopdquitis.HaoRanWRsarchAnalysthaoran.x.w@barclays.comWilliamHobbsHadofInstmntStratgy,UKandEuropwilliam.hobbs@barclays.comFigur12:Chinsxtrnalasstsas%ofnominalGDP,rlatitoG7conomisSourc:IMFIFS,Barclays050100150200250300350400450500550CNUSITJPCAGERFRUKExtrnalasstsminusrsrsas%ofnominalGDPFigur13:Extrnaldbtasa%ofGDPFigur14:ExtrnalliabilitisrsusxtrnalasstsSourc:Datastram,BarclaysSourc:IMFIFS,Barclays020406080ChinaBrazilIndiaSouthKoraTaiwanIndonsiaRussiaMxicoSouthAfricaMalaysiaExtrnaldbtasa%ofGDPfortopMSCImrgingquitymarkts0.00.51.01.52.02.501234567201020112012201320142015Ntintrnationalinstmntposition(rhs)Extrnalassts(lhs)Extrnalliabilitis(lhs)(trillions,USD)(trillions,USD)ThtmporarymarktpanicfromayuandaluationwillnodoubtbpainfultondurInFocus17Fbruary20176Instmntconclusions1.Stratgically:corporatscuritisprfrrdtogornmnt,andstockstobondsThrrmainunfulfilldconomicopportunitistoxploitforthcorporatsctorinouriw.Bondslookxpnsi,withpositiralrturnsliklyhardtoachinifinflationaryprssursrmainbnign.2.Tactically:wrmainorwightquitisContinuingconomicgrowthandunrmarkablaluationsshouldcontinutocombintognratattractirturnsforquityinstors.Marktcalls–summaryMacroconomysummaryProspctsforthworldconomysmtobbrightning,asidncdbythpickupinbusinssconfidncsurysacrossthmajorconomis.InflationxpctationshahardndamidstconjcturonthnwUSadministration’spotntiallyinflationaryagnda.Thmorisiblpickupinnominalwagssuggstthatundrlyinginflationaryprssurisalradyonanupwardtrajctory.UpcominglctionsincorEurozoncountrisrmainhighonthlistofworrisforinstorsaswmointo2017.Howr,instorswoulddowlltormmbrthlinkbtwncorporatprofitsandpoliticalriskistnuous,andthprsncofsignificantpoliticalbarrirsagainstfurthrrfrndainthcorEuropancountrisshouldproidsomcomfort.Fornow,Chinarmainslowrdownourgloballistofconcrns.Farsrgardingthpacofcapitaloutflowsharsurfacd.Howr,furthroutflowsorcurrncydprciationwouldn’tposahugrisktothfinancialsystminouriw,ginhowlittlChinarlisonxtrnalfinancing.Morbroadly,wblithworldconomywillcontinutogrowandsthcyclndasarlatilydistantprospct.Thpoliticalbackdropissttormainnoisyaswgointo2017,butinstorswillbbstsrdbytuningmuchofthisoutandfocusingonthabodscribdfundamntalsinouriw.Totalrturnsacrosskyasstclasss1.8%2.3%1.2%9.7%5.1%3.0%0.5%0.6%0.1%2.5%4.1%11.8%11.2%7.5%10.9%6.2%3.9%0.4%AltrnatiTradingStratgisRalEstatCommoditisEmrgingMarktsEquitisDlopdMarktsEquitisHighYildandEmrgingMarktsBondsInstmntGradBondsDlopdGornmntBondsCashShortmaturityBonds20162017(through16Fbruary)Asof15thFbruary;Sourc:FactSt,Barclays.Listofindicsusd:CashShortMaturityBonds:BarclaysUSTBills(USD);DlopdGornmntBonds:BarclaysGlobalTrasury(USDHgd);InstmntGradBonds:BarclaysGlobalAggrgatCorporats(USDHgd);HighYildEmrgingMarktBonds:40%BarclaysGlobalHY(USDHgd),30%BarclaysEMHardCurrncyAggrgat(USDHgd),30%BarclaysEMLocalCurrncyGornmnt(USD);DlopdMarktEquitis:MSCIWorldNtTR(USD);EmrgingMarktEquitis:MSCIEMNtTR(USD);Commoditis:BloombrgCommodityTR(USD);RalEstat:FTSEEPRANAREITNtTR(USD);ATS:HFRXGlobalHdgFund(USD).ChristianThis,CFA+44(0)2035558409christian.this@barclays.comInFocus17Fbruary20177SlctdriskstoouriwsUStradwar?ThlctionofDonaldTrumptothprsidncyhassparkdworrisaboutapotntialtradwarbtwnthUSanditsmajortradingpartnrs,ginthnwadministration’sprotctionistposturing.IfPrsidntTrumpwrtounilatrallynacttariffsonmajortradpartnrs,thiswouldsurlybfollowdbyrtaliatorymasurs,riskingafullblowntradwar.BasdonthPtrsonInstitutofIntrnationalEconomics’(PIIE)analysis,suchascnariowouldsndthUSconomyintorcssionandcostmillionsofAmricansthirjobs.Withlssinthwayofcongrssionalimpdimntshr,toacrtainxtnt,warlftrlyingonconomicslfintrsttodriawdgbtwnsoapboxtiradsandimplmntablpolicy.Sourc:PtrsonInstitutofIntrnationalEconomics,BarclaysChinacurrncycrisis?Chinscapitaloutflowshabguntoracclrat,withoutflowsrachinganarrcord$200billioninQ32016.ThishasoncagainsparkdworrisofayuandaluationbythPBoC.Inrspons,thChinsauthoritishatightndoutflowsthroughadministratimans,includingonoutboundFDI,goldimports,andcrossbordryuanpaymnts.OurbasoutlookisforthChinstocontinurlyingoncapitalcontrolsinordrtorgulatthoutflows,whilstadilymoingtoafrrfloatforthyuan.RgardlssofwhthroutflowsacclratfromthslowrpacrgistrdinJanuaryagain,wdonotthinkaChinsrsionofth1997AsianFinancialCrisisislikly.ThdomsticconomyhasrylittlrlianconxtrnalfinancingrlatitoitsEMcountrparts.Nonthlss,thisissomthingwcontinutomonitorclosly.Sourc:Datastram,BarclaysEuroCrisis2.0?Withlacklustrprofitmargins,stillanamiccorinflationandafragilbankingsystm,Europanmarktsarulnrabltoarangofpoliticalrisksinthcomingmonthsthatcoulddrailinstorsntimnt.DutchlctionsinMarch,FrnchlctionsinMayandGrmanlctionsinSptmbrmayushrinmorpoliticaldysfunctiontoargionstillrcoringfromthEuroCrisis.Thatbingsaid,nifMarinLPnwrtobthnxtFrnchPrsidnt,apotntialrfrndumonEUmmbrshipwouldrquiraParliamntaryot,whichwillrmainasignificanthurdl.InthNthrlands,anEUrfrndumwouldndachanginthconstitution,whichrquirsatwothirdsmajorityinparliamnt.InGrmany,pollsstillhighlightthatitisryunliklythatantiEUforcswillwildmuchdirctpoliticalinflunc.Ginthsbuffrs,wthinkthatEuropanasstsrmainattractitousonariskrwardbasis.Sourc:Datastram,Barclays16171819202122201520172019202120232025Baslintrndgrowthof2.5%FulltradwarscnarioUSGDP(trillionsofdollars,ral)2316.57.07.58.02005'092010'142000'04USDCNY(rhs)ChinanongoldintrnationalrsrsTrilliondollars,nsaExchangrat051015202530403545'13'12'11'10'16'15'14ItalySpainGrcPortugalIrland10yargornmntbonds,sprads.Grmany(%)InFocus17Fbruary20178AsstclasssummaryWmaintainaStratgicAsstAllocationforfiriskprofils,basdonouroutlookforachasstclass.OurTacticalAllocationCommitt(TAC),madupofoursniorinstmntstratgistsandportfoliomanagrs,rgularlyasssssthndfortacticaladjustmntstothosallocations,basdonourshortrtrm(thrtosixmonth)outlook.Hr,wsharourlatstthinkingonourkytacticaltilts.DlopdMarktEquitis:Orwight(changd27January2017)ForcastrsrmainlockdinadbatastohowmuchofthnwUSadministration’sarious,fluidandoftncontradictoryproposalstofactorin.Inthmantim,ladingindicatorsforthworldconomy,continutopointtobrightrtimsahad,indpndntofthospolicyproposals.Thsfirmingprospctsforglobalgrowthandinflationarwhatmattrfortrndsincorporatarningsandthrforprospctiquitymarktrturns.Withstockmarktaluationsmuchlssrmarkablthanthcaricatur,prospctirturnsarliklydominatdbythosaformntiondglobalgrowthprospctsrathrthanmultiplxpansion.Thcurrntyildaailablfromdlopdworldstocks(diidndsplusntbuybacks),allidtoaconsratiassssmntofprospctidiidndgrowthsuggstsmidtohighsingldigitannualisdrturnsarstillwllwithinrachfromcurrntlls.ThUSrmainsourhighstconictionorwight,thankstoadomsticconomythatisfurthstalongthrcorypathandadominantsharofatchnologysctornjoyingbothcyclicalandstructuralgrowthtailwinds.Wdonotsthproposdtaxcutshaingamatrialffctontrndconomicgrowthandsowouldadisiwingthirffctsassimilartothatinflictdbythoilpricplungof201415–atmporaryphnomnonthathasnoimpactonalradyhalthytrnds.ThongoingpickupinglobalinflationshouldladtobttrpricingpowrandhighrprofitmarginsforcontinntalEuropancorporations,whichwouldhlpthmfinallystarttomakgoodthatyawningarningsgaps.thirUSprs.CatchuppotntialmaybhighrinEurop,butourconictionrmainsalittllowrthanforthUS.EmrgingMarktEquitis:Orwight(incrasd23Nombr2016)WmodourrcommnddtacticalpositioninEmrgingMarktEquitisuptoOrwightfromNutralinNombr.ThEmrgingMarktbusinsscyclisbottoming,asidncdbybusinssconfidncsurysandtraddata.Thlattrhasclarlycollapsdandrcordinalutrmsdutocommoditypricswings,butthlatstroundofbusinssconfidncsurysharboundd.USconsumptionalsolookshalthy,withwagsnowmorisiblypickingupandcrditproisionfollowingsuit.ThissuggststousthatthfundamntalmacroconomicbackdrophasturndmorpositiforEmrgingMarktcorporatprofitability.WithinEmrgingMarktEquitis,Asiarmainsourprfrrdrgion,withKora,TaiwanandChina(offshor)ourhighstconictioncountrybtsonastratgicbasis.Withthrgions’arningssnsititothtradcycl,whatPrsidntTrumpdcidstoimplmntinrgardstotradpolicyisimportant.Hr,wsuspctthatconomicslfintrstwillultimatlytriumphorsomofthPrsidnt’smorpopulisttradthrats.CashShortMaturityBonds:Undrwight(dcrasd23Nombr2016)Whilcashcontinustoplayapiotalportfolioinsulationrol,thrisingappalfromEmrgingMarktEquitishasldthTacticalAllocationCommitttodployourcashholdingsintothformr,bringingourpositioninCashShortMaturityBondsfromnutraltoundrwight.OurfaourddlopdquityrgionsrmainthUSandEuropxUKThbackdropforEmrgingMarktcorporatprofitabilityhasturndmorpositiInFocus17Fbruary20179DlopdGornmntBonds:Undrwight(dcrasd13Octobr2016)Nominalyildsoffrdbylargchunksofthgornmntbondunirsarstillngligibl,naftrthfairlydramaticslloffsnsinclastsummr.Instorswillliklyhatoworkhardtomakralrturnsfromthsllsorthnxtsralyars.OuriwrmainsthatsuchaluationsundrstimatthundrlyinginflationaryprssurswithinthUSconomyinparticular,somthingthatincominginflationdatapaysomtstamntto.ThthratofamorfiscallyxpansiUSadministrationhasacclratdthyildrtracmnt.Forus,thllof(rturnsinsnsiti)cntralbankownrshipprobablysuggststhatthbondmarktwillrmainmororlssordrlyandmaylagapickupininflation.Nonthlss,ourcontinuingsmallstratgicandtacticalallocationtotharasuggststhathighrralrturnslilswhr.InstmntGradBonds:UndrwightThspradofinstmntgradcrditorgornmntbondyildshashldmororlssfirmamidstthabomntiondcorrction;howrthishasstilllftinstorsnursingsomshorttrmbruissparticularlywithinthutilitisspac.Nominalyildsinhighqualitycorporatcrditrmainlowinabsoluttrmsandmaymakthjobofthostryingtomakpositiralrturnsdifficult.HighYildEmrgingMarktBonds:Orwight(incrasd13Octobr2016)LastsummrwmodfromatacticalundrwighttoorwightpositioninHighYildandEmrgingMarktBondsbyaddingtoGlobalHighYild.ThiswasfunddbymoingfromatacticalorwighttonutralpositioninCashShortMaturityBonds.Ginourmorsanguintakonthariousriskstoglobalgrowthandinflation,yildsonjunkcrditlookattractionariskrwardbasis.WhamorrcntlynutralisdourarlirundrwightpositioninLocalCurrncyEmrgingMarktBonds,againusingCashShortMaturitybonds.Commoditis:Nutral(Incrasd13May2016)WclosdourlonghldundrwightinthcommoditycomplxlastMay.USmontarynormalisationwillliklyproidahadwind,butthstabilisationinChinsgrowthlookssufficinttooffstthisforthmomnt.AlthoughthprospctsforgratrUSinfrastructurspndinghaincrasdalittlinthwakofthUSlctions,wwouldstilltaksomofthmorgrandiosclaimswithapinchofsalt,justaswwouldtradcarfullyaroundthrcntrlatdspikinindustrialmtalsprics.Instorsarliklybstsrdbytiltingthircommodityxposurtowardsoilandawayfromgoldwhrpossibl,withthlattrstillparticularlyulnrabltofurthrUSintrstratriss.Wsoilpricscontinuingtodrifthighrorthcoming12–18monthsasthmarkt’sworstfarsonChinafailtomatrialisandasmallrthansuspctdsurplusisworkdthrough.RalEstat:NutralRcntolatilityhassrdasatimlyrmindrofthimportancofmaintainingadirsifidportfoliowiththabilitytowathranumbrofmarktnironmnts,andwcontinutoncouragclintstonsurthatthyarfullyallocatdtoRalEstat.AltrnatiTradingStratgis:Undrwight(dcrasd13May)WshiftdourprioustacticalundrwightinCommoditistoAltrnatiTradingStratgis(ATS).Thisisprimarilyafunctionofthdiffrncinolatilitisforthtwoasstclasss.ThrislssriskbingundrwightthlowrolatilityATSinthcurrntmarktnironmntinouropinion.Alongsidthis,rgulationandlowrlraglathisdirsifyingasstclasswithoutmuchtacticalappalatthmomnt.SomrturninginflationiscntraltoourcurrnttacticalposturInstorsarliklybstsrdbytiltingthirxposurtoward