ABN AMRO increases risk in stocks and bonds portfolio

Press release -

ABN AMRO has decided to increase the risk a little in the composition of its stocks and bonds portfolio. The asset allocation now reflects a somewhat stronger preference for stocks, with the weighting upped from neutral to slightly overweight. ABN AMRO is also easing away from high-quality but low-return eurozone government bonds, investing the proceeds from sales of these bonds in euro corporate bonds and emerging market debt. ABN AMRO continues to steer clear of bonds in general.

ABN AMRO notes that stock markets recently experienced a minor correction, triggered mainly by the outbreak of the coronavirus. ABN AMRO is not surprised by the correction, nor by how fast the markets rallied. The bank sees this as evidence of stock market resilience.

Resilient

As ABN AMRO Investment Committee Chair Richard de Groot puts it: “One of the forces contributing to this resilience is the low level of interest rates, which is driving investors to look for alternatives to very low or even negative yields on bonds. The continued accommodative stance of central banks is also buoying up stock markets. The quick market recovery following earlier incidents such as the conflict between the US and Iran, and now the outbreak of the coronavirus, is evidence that these underlying forces are strong enough to help markets overcome short-term setbacks.”

China impacted

The coronavirus is impacting the Chinese economy, but ABN AMRO points to steps Chinese policymakers are already taking to increase stimulus, such as supporting banks with liquidity. As a result, the slightly more positive stance on stocks has not prompted a change in regional or sector allocation. Within the bond portfolio, investment-grade corporate bonds are still preferred. Emerging market debt offers higher returns – along with higher risk. Emerging market government bonds, for example, do not pose significant default risk, given the absence of major budget or current account deficits. In the eurozone, there is still a preference for government bonds from peripheral countries such as Spain.

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