Soc Gen Says Time is Right for China Stocks and Emerging Bonds

Strategists at Societe Generale, who identify market timing signals using quantitative models, believe it’s time to reduce allocations in global equities “as dwindling expected returns indicate the end of the current bull market isn’t far off.” This according to a recent Bloomberg article.

The bank further asserts that Chinese equities, euro-zone fixed income and emerging market bonds will deliver the highest returns over the next 12 months. But the team—led by the bank’s Paris-based head of global asset allocation Alain Bokobza—says this will be accompanied by “some of the highest expected levels of volatility of any asset anywhere in the world over the next 12 months.”

The team offers the following additional observations:

  • Expected returns and volatility trends are improving for government bonds relative to equities;
  • Over the past three months, expected returns have been down across all asset classes (with stocks down the most);
  • Among government bonds, emerging markets and euro-area government bonds are preferred;
  • The bank has no allocation to commodities.

The article notes that Societe Generale was ranked “No. 1 in global strategy research for the 14th consecutive year in 2017.