“Investment Strategy”sets forth the different asset allocation choices which are implemented in BNP Paribas Asset Management's portfolios. The investment strategy derives from a running analysis of numerous factors (i.e. the general economic situation, earnings growth rates and financial ratios, assessment of market valuations, technical analysis).
The end of year is traditionally a time for retrospectives and forecasts for the following year. 2011 will be remembered as an extremely difficult year, marked by the deepening financial and economic crisis in the eurozone, political upheaval in the Middle East and North Africa, the Fukushima disaster, and confirmation that the US recovery is running out of steam.
Against such a backdrop, and at the time of writing this, market performances do not seem as bad as might have been feared in such circumstances. The indices of the eurozone and numerous emerging countries lost about 20 percent, credit suffered, but the US stock market, commodities and on average sovereign bonds were relatively stable.
Valuations that are in some cases modest (equities) and support from monetary policies, which remain highly expansionary, undoubtedly acted as dampers.
In our opinion 2012 is unlikely to start better than the final months of 2011, and we maintain very conservative allocation recommendations, like in the previous months. But, although the downside risks are constantly highlighted (and we believe they are substantial), the approach of the end-of-year festivities encourages a little wishful thinking, and we consider what are the upside risks for next year.
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