In September, we were quite surprised by the discrepancy between the supportive macroeconomic data and the equity market correction. After the recovery in October, we continue to think the macroeconomy should continue to support risky assets.

In fact, economic data still show the strong resilience of the developed countries, especially in Europe. In these regions, PMI levels are still over 50. Moreover, even if the manufacturing sector has been slightly impacted since June, mainly in the US, it now seems to have found a bottom, and activity in the services sector continues to expand rapidly. The economic surprise indices are also an illustration of this resilience: while staying in positive territory in the Europe for several months, the index in the US is clearly improving and is now above zero for the first time since last January.

Beyond the resilience of the developed countries, Asian manufacturing PMIs have also improved in the last month. While recent uncertainties about the economic slowdown in the emerging countries has exacerbated investors’ worries, the stabilization of the manufacturing sector will be a key element over the next few months. The recent shift in emerging manufacturing-sector data provides a reassuring scenario of a limited slowdown. Especially after the Chinese central committee plenary session that took place at the end of October, we remained confident in the willingness and the ability of government to reach the 6.5% economic growth target and thus to manage a soft landing.

 

 

Read the full Cross Asset Allocation Investment Strategy - November 2015​