The Federal Reserve’s rate hike on Wednesday didn’t prompt fireworks in financial markets. Equity investors took the Fed’s decision positively, as Chair Janet Yellen indicated that the central bank will remain on an accommodative path. Bond markets had a muted response to the Fed’s well-signalled move.
The investment strategy of ABN AMRO Private Banking is aimed at providing stable future returns. The asset allocation, as determined by the Global Investment Committee, remains tilted in favour of equities with a cautious stance toward bonds. Alternative investments, consisting of hedge funds and commodities, add diversification and return potential in volatile markets.
Equity markets retreated this week, as investors were still digesting the ECB’s recent decision not to increase the size of its monthly asset purchases and to only moderately lower the deposit rate. Bond markets initially fell in response to the ECB’s statement, before recovering a bit this week.
Yesterday, after the European Central Bank (ECB) announced adjustments to its monetary policy that were less than expected, markets were disappointed. Bond yields rose, equity markets fell and the euro surged.
Expectations continue to build that the US Federal Reserve and the European Central Bank will continue to move their policies in different directions in December. The minutes of their last meetings add to these expectations, and reveal inflation worries within the ECB.
At its meeting on 12 November, the Global Investment Committee reduced risk by moving the strong overweight in equities to a less pronounced overweight. In the balanced profile-3 portfolio, this amounted to a reduction in equities of 5%. The proceeds were invested in bonds, an asset class which remains strongly underweight.
Central banks continue to dominate markets. In December, the paths of the European Central Bank and the US Federal Reserve will further diverge, as the ECB adds to its accommodating monetary policy and the Fed hikes rates for the first time since 2006.
‘In the third quarter of 2015 we raised our financial targets, posted a good set of financial results, successfully raised EUR 1 billion of Additional Tier 1 capital and continued preparing for the bank’s intended IPO.'
Speculations around policies of the major central banks hold sway of financial markets for a while now. Expectations have risen that the Fed may lift its interest rate in December. Bond markets retreated this week, whereas equity markets continued to recover.
ABN AMRO announces today that the supervisory authorities in the Netherlands and Dubai have completed their investigations into the previously ascertained irregularities at its Private Banking office in Dubai.
