We believe the Fed would keep rates in restrictive territory in the near term. This, coupled with concerns over earnings, allows us to stay cautious on risk assets but with select opportunities in US equities, businesses with strong balance sheets, and quality, value and dividend oriented stocks.
In credit, some US IG and EM debt appear attractive. However, investors should include protection in portfolios in the form of USTs on which we are more positive now. This approach should be complemented with an overall well-diversified stance that includes commodities.
After several months of informal negotiations, the European Commission proposed on 9 November a reform of the Stability and Growth Pact (SGP) to be debated. Only the broad outlines of the reform have been presented. The Commission has deliberately left the most politically sensitive details open. The reform of the fiscal rules must thus be adopted next year.
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