"The golden age of lazy asset allocation is over"

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"THE GOLDEN AGE OF LAZY ASSET ALLOCATION IS OVER" (1243 GMT)

If you spontaneously associate the 'OK boomer' phrase with the 60/40 portfolio, this blog post is for you!

According to Vincent Deluard, a strategist at StoneX, the comeback of inflation, lower for longer yields and high valuation mean the glory days of the good old 60/40 portfolio are behind us.

As a consequence, "the golden age of lazy asset allocation is over" and it's time to be creative, Deluard argues, proposing five quite unusual portfolios for the coming decade:

 

(Julien Ponthus)

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SIGNS OF HOPE FOR EUROPE-LISTED HOTELS (1125 GMT)

With the second European COVID summer coming to an end, a quick look at some of the top hotel shares show they have heavily underperformed the broader market, or even the leisure sector.

Analysts at UBS believe there's hope for the sector however. Mentioning UBS Evidence Lab Google data, which tracks interest in hotel brands, UBS says August numbers indicate that interest for most brands into the end of Q3 is strong.

The last few months of the year might prove more challenging, as holidays end, but some "leisure demand is still likely to remain solid," they say.

There's also signs discretionary business travel is returning, the Swiss bank adds.

UBS is "selectively positive on hotels".

 

(Joice Alves)

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UK MIDCAPS, AGAIN! (1034 GMT)

The FTSE 250 is outperforming the FTSE 100 and most European benchmarks again today and is currently hovering around the floatation mark while the STOXX 600 is down about 0.5%:

Unlike the blue chip FTSE 100 which is trailing behind the broader European market this year with a 10% gain, UK midcaps are up 17%, just slightly below the pan-European index:

Truth be said there seems to be more optimism out there on the ability of the FTSE 250 to capture the buoyant UK recovery than on the capacity of the FTSE 100 to extract profits from global growth.

In a note on UK equities, Jefferies analysts say they remain bullish on UK equities given the strength of Britain's economy.

"With the best of China’s growth behind us, the good news is that the domestic economy is supporting a capex cycle as well as a resuscitation of dividends", they wrote.

"The UK nominal profit boom remains intact, hence, the best part of the story may lie in the domestic recovery and not necessarily in all overseas markets", they added.

 

(Julien Ponthus)

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GERMANY’S ELECTIONS: NO FISCAL BOOST ANYWAY (0950 GMT)

One of the main concerns around the German elections is how the outcome could potentially impact the country's fiscal policy.

The general idea is that a move to the left could make Germany more available to accept public spending in Germany and in the euro zone. 

“This view contains a kernel of truth. But it is overdone,” according to Berenberg economist Holger Schmieding. “Under any new German government, changes in the overall fiscal stance will only be modest on the national and euro zone level, in our view.”

Schmieding argues that Germany doesn’t need a fiscal boost as its "government consumption rose by 19% in real terms from 2010 to 2019, well ahead of the 8% increase for the euro zone,” and its balanced budget is not the result of austerity measures.

The centre-left SPD owes its rebound in the polls to the personal popularity of Olaf Scholz. But he “is probably aware that high deficits could cause a voter backlash that could hurt the SPD at subsequent state and other elections.”

Besides, as he has been the key German negotiator on EU/Eurozone fiscal issues since 2018 already, we would not expect a dramatic shift in the German position.

Germany's centre-left Social Democrats (SPD) have pulled ahead of Chancellor Angela Merkel's conservatives for the first time in 15 years, according to an opinion poll published on Tuesday, a month before the federal election. 

(Stefano Rebaudo)

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RATES WORRIES HIT STOCKS (0728 GMT)

European stocks are falling with firming euro zone bond yields adding to worries as the annual Jackson Hole symposium gets underway. Ten-year German bond yields are at a one-month high.

As some analysts put it, the sentiment dominating the market today will be a “mood of tense waiting” after yesterday’s jump in global bond yields on concerns that Federal Reserve might be rushing to reduce monetary stimulus.

The Stoxx 600 is down 0.5% with retailer and basic materials stock indexes worst performers down around 1.1%.

Interest rate-sensitive tech stocks are among the losers of the session, down 0.7%. Banks are also under selling pressure, down 0.6%, after yesterday's rise.

Vivendi is bucking the trend, up 2.8%, after a couple of upgrades by investment banks as Vivendi’s unit Universal Music Group expects further revenue growth this year.

Shares in DWS fall 8% following a news report that U.S. authorities are investigating the fund manager.

(Stefano Rebaudo)

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MOVING TO K POP (0707 GMT)

The Bank of Korea became the latest central bank to start the shift away from pandemic-era stimulus on Thursday after raising interest rates for the first time in almost three years. Policymakers said the economy was overheating and in a notably hawkish tone warned that they could tighten again.

While the Korean economy is running particularly strong, the hike in rates serves as another reminder for investors that the dialling back of extraordinary loose monetary policy is beginning in earnest. The hike comes as the Federal Reserve begins its annual Jackson Hole symposium.

Emerging market stocks fell after the announcement, as did markets across Asia -- with a rapid rise in cases of the Delta COVID-19 variant also hitting sentiment.

After climbing to record highs on Wednesday, the mood on global stock markets looked a little more cautious with European and Wall Street futures in the red. Many investors are reluctant to place big bets ahead of the 3-day virtual conference.

No one is expecting the Fed to sound the gun on tapering its asset purchases at the symposium, but investors will be listening closely for Chair Jerome Powell's views on Friday on when to dial back the stimulus as the economy recovers all its lost output from the pandemic and inflation rises.

Elsewhere, the dollar was little changed and stood at one-week lows. The safe-haven greenback had been catapulted to a multi-month high last week on nerves about the global economy.

Oil prices dipped after three days of gains, although the Brent crude price was firmly above $72 a barrel.

In company news, shares in German fund manager DWS fell 5.3% in early Frankfurt trade following a news report that U.S. authorities are investigating the manager over its sustainability claims. 

Australia's biggest supermarket chain Woolworths announced a A$2 billion ($1.45 billion) share buyback and a 20% jump in annual profit as lockdowns sparked demand for household essentials.

(Tommy Wilkes)

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EUROPE IN THE RED, FED IN FOCUS (0619 GMT)

European stocks are poised to open lower but within striking distance of their all-time highs ahead of U.S. Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium on Friday.

While expectations are that the Fed has no reason to rock the boat right now, investors will still be looking for assurances that the U.S. central bank won't rush to tighten monetary policy.

Most analysts see a possible equity correction by the end of the year as economic momentum is peaking and central banks are preparing the ground to reduce monetary stimulus.

(Stefano Rebaudo)

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