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Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Global growth accelerating

Perspectives

Global growth accelerating

Steven Wieting

By Steven Wieting

Chief Investment Strategist and Chief Economist

May 26, 2017Posted InForeign Exchange, Equities, Investment Strategy, Investments and Fixed Income

The Citi Private Bank Global Investment Committee kept its asset allocation unchanged at its May meeting. Both US and Global Equities remain at a full /neutral allocation, with Fixed Income 1.5% underweight. We maintain small overweights in Cash and Gold. We see building relative value in international equities markets. Summer volatility may present a good opportunity to raise allocations in these markets.

As was widely expected, the election of a centrist in France generated a relief rally in Eurozone assets. World financial markets have remained resilient overall. However, political risks in several regions have again raised attention. In our view, these risks argue for very broad-based regional diversification.

In the US, congressional testimony will shortly be heard regarding allegations of Presidential campaign misconduct. The US market reaction has been highly muted with regards to this issue in isolation. However, internal political disagreements have slowed the path toward fiscal easing. This has resulted in a weakening US dollar, a moderation in US long-term interest rates, and less robust positive returns in US equities compared to the rest of the world.

In Brazil, allegations against the President have generated a far larger market impact as politics there could feasibly hold back the pace of economic recovery for some time. We believe the different financial market reactions in the US and Brazil are due to more than just the relative riskiness of developed market relative to emerging market countries. The long recovery in the US has left a sense of durability. Brazil’s long, deep recession and recent experience of political turmoil a heightened sense of vulnerability. While idiosyncratic risk is high, the now higher risk premium in Brazilian assets suggests a greater probability of future investment outperformance.

Separately, the French presidential election outcome bodes well for a stronger Franco-German partnership and European growth prospects. However, markets may underestimate the importance of Macron obtaining a majority in the French parliamentary elections in determining the course of Eurozone-wide fiscal actions and long-term reforms.

In China, authorities are tightening liquidity conditions following very robust underlying economic activity in the first quarter. However, we see China as very unlikely to tighten excessively ahead of a key political transition in October and the period immediately beyond.

As noted, world markets have been resilient, and political worries such as Brexit have routinely seen excessively pessimistic forecasts for regional economies. We believe world economic growth is now mildly accelerating without policymakers resorting to large scale monetary or fiscal stimulus steps. This argues for increased exposure to global equities and reduced exposure to the lowest yielding bonds. Given that some of the factors driving up equity prices in the past year are non-repeating and the very high frequency of summer-time equity market setbacks, we would use drawdowns to raise risk allocations assuming our fundamental views remain intact.