Welcome to the 26th edition of Perspectives.

For much of this year, risk assets have enjoyed a healthy climb, helped by a dovish tilt from major central banks and hopes of a trade deal between the US and China. But as we entered May, volatility came back with a vengeance. Both global and Middle East equity markets gave up some of their year-to-date gains while bond yields continued to surprise on the low side.

In the first part of this publication, we try to assess what is currently priced by the market in terms of global recession risk. At the time of our writing, the U.S 10-year treasury yield is trading at 2.1% and the three-month to 10-year curve is slightly inverted, which seems to indicate that the market is priced for recession. We don’t buy the current bond market panic and explain why we believe investors should keep some exposure to risk assets.

In the “Hot topic” section, we make a case for Active management, arguing that asset allocators should balance their portfolios between passive and active instruments in a smart way.

In the second part of this June edition of Perspectives, we shift our focus toward investment opportunities in the Middle East. While our regional equity markets were not immune to the broader global risk-off sentiment that prevailed in May, recent weeks have seen several developments both globally and locally which have largely gone unnoticed yet are likely to emerge as positive catalysts for the GCC investment climate through the second half of 2019 and 2020.
The Investment theme of the month is Egypt, a country that has been in an overweight position in our Middle East and North Africa equity portfolios for some time now.

We hope you will enjoy this issue.