Latest market moves and their potential impacts

On average, US investors have a relatively strong home bias compared to investors in other developed markets and especially compared to European investors. A higher allocation is justified based on the larger share of the US in the global economy and global financial markets. However, even after a correction for the US market size, the home bias remains relatively large. Although US large caps are globally exposed, there is concentration in the sector composition, with a technology sector weight of 35%. In our view diversification remains key, across sectors, asset classes and currencies.

Emerging markets have grown significantly over the past decades and represent more than 50% of global GDP and although the region’s debt market has risen significantly it still lacks the equivalent market weight. However, EM debt has become a large and liquid market in its own right. After a few years of outflows, investor interest in the asset class has returned. The asset class has benefited from US dollar weakness and, in a longer perspective, there has been an improvement in overall fiscal status.