Pressemitteilung DNB Asset Management S.A.: Market Outlook: Still Underweight Equities

teaser_pm-dnb_300_200DNB| Luxemburg, 13.07.2016.

What we did not expect, but feared, did actually happen last week. The UK has chosen to leave the EU. Fear of Brexit was one of the reasons why we recommended underweight equities in the June market view. The referendum outcome contributes to underweight equities also in July.
The political risk has increased

The fear is that voters in other EU countries, where discontent with the union also is significant, will demand additional referendums. This creates uncertainty about economic growth, which results in greater volatility in financial markets.

We do not believe the economic consequences of Brexit are a major threat to global growth. But markets dislike this uncertainty, and it puts a damper on investors risk appetite.

Too early to buy
In June market view we addressed a risk for stock market correction as the markets had been strong despite weak earnings. This argument still applies. The markets have not fallen enough that we think it is cheap enough to buy equities.

We reduce exposure to European equities and global Financials
Europe is most vulnerable to negative spillover from Brexit and we therefore downgrade European equities from overweight to neutral.
Higher volatility and renewed growth uncertainty postpones potential rate hikes from Fed. Increased asset purchases by central banks will help to keep interest rates low. Flatter yield curves are challenging for banks’ earnings, and the rest of the financial sector (insurance & real estate) appears expensive. We therefore downgrade financials from neutral to underweight.

The attached matrix shows recommended short-term deviations from a balanced portfolio divided into several asset classes. The deviations from the long-term distribution should not constitute more than 5 to 15 per cent of the total portfolio to prevent excessive short-term risk-taking. The scale must be seen in the context of investors’ risk willingness and investment horizon.

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Disclaimer
This presentation is for internal use by Wealth Management, a business area in the DNB Group, for communication aimed at its customers. Wealth Management consists of the fund management company, DNB Asset Management AS and other companies in the asset management area in the DNB Group as well as the Pension & Saving Product Sales division and Private Banking division in DNB Bank ASA. The contents of this presentation are not intended for publication and the information herein may not be reproduced without the consent of Wealth Management.

The information in this presentation is based on information that is available to the public and is not guaranteed to be accurate, free from errors or complete. The views in the presentation reflect our opinions at the time when the presentation was prepared and we reserve the right to change our opinion without warning. The written material that is distributed must be seen in the context of what is said orally during the presentation. The companies in Wealth Management cannot be held liable for direct or indirect losses that are attributable to the how the information in this presentation was understood and/or used.

This presentation should not be construed as either an offer or a recommendation to buy or sell financial instruments. It should be noted that investing in the products presented herein entails risk, which includes a risk of losing all or part of the invested amount. Previous returns are no indication of future returns.

DNB Bank ASA and/or other companies in the DNB group or employees and/or employee representatives may trade or have positions in instruments discussed in this presentation or related instruments, or may provide financial advice and banking services in this connection. Confidentiality rules and other internal rules limit the degree to which certain types of information may be exchanged between different units in DNB. This means that the employees in the business area Wealth Management who have prepared this presentation may be unaware of or not permitted to use certain information held by other companies in the DNB group that could be relevant for this presentation.

 

 

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