I am pleased to share the latest investment strategy report from RBC Wealth Management—Global Insight. In it you will find as usual some of the best analysis and thinking from the strategists at RBC Wealth Management. In my view, Eric Lascelles’ piece on “The Year of the tariff” highlights an important change in geopolitics and the global economy—that the US trade war follies are China’s [and to a lesser extent the European Union’s] opportunities as they continue to broaden both their investments outside of their own borders, and their diplomatic adventures. This bears notice, as it would represent a long-term shift in power and wealth. Watch, for example, the response of Germany, England, France and China to the US decision to leave the JCPOA (the ‘Iran Nuclear Deal’) for an idea of the direction that shift in global influence could take. Right now, we are looking to take advantage of the (in our view) historic mis-pricing of international equities in a number of client portfolios, and expect this to be a move that pays off for a long time. Domestic markets contain their own opportunities, and the coordinated and strategic combination of Canadian, US, and international equities is better than any one market on its own.
The year of the tariff
Financial markets are in a state of high alert, responding spasmodically to an onslaught of macro- and company-level shocks. Among them, protectionism has been a particularly central and recurring villain. Just how bad might the “year of the tariff” turn out to be? RBC Global Asset Management’s chief economist tallies up the good, the bad, and the ugly.
The U.S. dollar in an era of protectionism
The rise of protectionism has added a new risk to the equation, forming cracks in the dollar’s nascent recovery. While we think the trade tensions will prove to be more bark than bite, and that the dollar will sidestep the cracks and keep its recovery intact, investors should still consider what protectionism could mean for the dollar.
Undervalued and under the radar
U.K. equities have been dogged by chronic underperformance for many years. But with several valuation metrics as low as we have seen them in a long time, U.K. equities should no longer be ignored. Given the compelling value case, we are upgrading our stance to Market Weight.
As always, Global Insight also provides our latest thoughts on equities, bonds, commodities, and currencies.
Please take a few moments to review this month’s Global Insight.