Barclays ‘Compass': Prospects for the World Economy Are Brightening

• Continued pick-up in business confidence surveys across the major economies
• US and Continential Europe Equity Markets offer best growth prospects
• Emerging Markets upgraded to overweight, driven by burgeoning business confidence 

Dubai, UAE, May 14, 2017:  Barclays revealed today its latest tactical investment recommendations in its Q2 2017 “Compass” report, published by Barclays’ Private Bank. 

The latest edition of the Compass research report, which examines major asset classes globally, maintained its overweight allocation to Developed Markets Equities stating that the US and Europe stock markets (excluding the UK) are likely to offer best growth prospects for investors.

The report also assigned an overweight allocation to Emerging Markets Equities as the business cycle continues to firm up, a view that is supported by stabilization of business confidence surveys and trade data. Within this asset class, Asian stocks remain the preferred option, with Korea, Taiwan and China (offshore) seen as the markets of choice.

Similarly, ‘Compass’ maintained its overweight allocation for High Yield & Emerging Markets Bonds. Although relatively expensive, Barclays’ strategists believe that the returns of High Yield Bonds are still attractive in the context of a fixed income complex.

Commenting on the report, Francesco Grosoli, Barclays’ Head of Private Bank for Europe, the Middle East and Africa (EMEA), said: “While the political scene is likely to remain a source of worry for investors, Barclays investment strategists believe that the potential for economic improvements will drive markets. As such, investors are likely to be better served by putting their cash to work in asset classes such as equities in developed and emerging markets”. 

He added: “Improvements in business confidence surveys across major economies confirm the brighter prospects of the world economy. We, at Barclays, believe that the world economy will continue to grow at above stall speed and see the business cycle end as a distant prospect.”

Barclays Compass research report also recommended an underweight allocation for Cash & Short-Maturity Bonds, as investors are more likely to benefit from the improving conditions in both developed and emerging markets equities. This was accompanied with an underweight recommended allocation to both Developed Government Bonds and Investment Grade Bonds, as most government bonds continue to offer negligible returns while Investment grade bonds returns continue to be unattractive.

The report also maintained its  neutral allocation to Commodities, highlighting that investors are more likely to benefit from tilting their investments towards oil and shying away from gold, as it continues to be susceptible to further US interest rate hikes. The latest instalment of the report has also maintained its neutral allocation to Real Estate, while Alternative Trading Strategies’ allocation was downgraded to underweight.