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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。

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。

Shifting-our-fixed-income-allocation

Perspectives

Shifting our fixed income allocation

Steven Wieting

By Steven Wieting

Chief Investment Strategist and Chief Economist

December 16, 2016Posted InInvestment Strategy, Investments and Fixed Income

The Citi Private Bank Global Investment Committee left its broadest asset allocation unchanged, but made an adjustment within US fixed-income markets.

The allocation to global equities remains at -1.0%, fixed income at -1.0%, with cash and gold at slight overweight positions.  Within this allocation, we maintained a neutral (full) allocation to US equities, an overweight to US dollar credit and select emerging markets fixed income.  We also maintained large underweights in European and Japanese government bonds. In international equities markets, we see currency depreciation hampering potential returns measured in US dollars, with currency markets volatile looking forward.

The GIC raised its allocation to US high-yield fixed income, adding a 1.0% position in variable-rate loans which benefit from rising short-term interest rates. We reduced the overweight in US investment grade corporate debt to fund the position, and maintain a neutral duration view.

The anticipation of fiscal easing and de-regulation in the US is driving a substantial rebound in growth and inflation expectations. We see the likelihood of personal income and corporate tax cuts passed by the US Congress by mid-2017, with some impact realized before 2017 ends.  A rise in infrastructure spending is possible, but less certain.  Also uncertain are any spending restraints to account for a likely increase in US deficits.  The President Elect’s cabinet picks suggest a sharply-focused expansionary agenda, though international trade frictions remain a risk.

US equities and bond yields have both risen significantly on assumptions regarding US policies.   

This has rippled through world markets.  With Federal Reserve uncertainty adding to the substantial guesswork on fiscal policy, the near-term path of markets may soon run ahead of the positives.  While US EPS are rebounding slightly, and could benefit from a large, one-time corporate tax cut, US equities have already risen 8% more than EPS over the past 12 months. 

A rise in the petroleum price on promises of OPEC and non-restraints has been a substantial market driver as well, and is likely to help US energy producers.  However, the impact on consumers across the world is likely to be felt before any US stimulus.  We continue to favour energy-linked investments across most asset classes in both EMs and DMs.

Finally, to recognize the tighter spreads to US Treasuries and stronger growth outlook, we shifted our overweight in US investment grade debt to high yield, by adding floating rate loans.  These are higher in capital structure, less volatile than high yield bonds, with yields that vary with policy rates and LIBOR.