Schroders remains bullish on global equities despite rising bond yields, citing resilient economic growth and strong corporate earnings as key supports. The asset manager’s chief investment officer, Ugo Montrucchio, emphasized that recent increases in bond yields reflect stronger nominal growth rather than weakening economic fundamentals. Schroders continues to favor equities, commodities, and emerging markets, while downgrading government bonds to a neutral stance and maintaining a negative view on corporate credit.
The firm highlights robust earnings growth, particularly in the US technology sector, where AI-related investments are driving profits. Schroders also sees opportunities in Europe, citing supportive earnings trends and exposure to industrial activity and technology adoption. Within emerging markets, the outlook has been upgraded to positive, with improving earnings revisions and continued benefits from technology investment. Taiwan is identified as a preferred route to access the AI theme, with earnings momentum extending across a broad technology ecosystem.
While Schroders remains constructive on risk assets, it warns that a disorderly rise in long-term bond yields could challenge this outlook. A sharper sell-off in longer-dated government bonds could alter the investment backdrop, potentially triggered by concerns about central bank credibility or sovereign debt sustainability. As a result, the firm has moved to a neutral position on government bonds despite improved valuations following the recent rise in yields.
Schroders continues to favor commodities as portfolio diversifiers, maintaining positive ratings on gold, energy, and industrial metals. Gold remains supported by central-bank buying and concerns around fiscal sustainability, while energy and mining stocks offer protection against geopolitical shocks and stronger-than-expected growth. Additionally, the Japanese yen has been upgraded to positive, citing attractive valuations and the prospect of further monetary policy tightening from the Bank of Japan.