Infrastructure versus sovereign bonds
We have repeatedly emphasised this before: Donald Trump’s campaign promises and the probable launch of “fiscal QEs” in Europe and in the US, offer a bright future for infrastructure investments. There is no doubt that construction companies have a fabulous opportunity here and will benefit from it. Any investment in this sector is therefore a safe bet. However, if it is likely that North American companies will be solicited to work in the United States (national preference and protectionism oblige), it is not Western companies that will benefit the most from this windfall, as we analysed it in the GEAB no. 104 (April 2016), but rather those of the emerging countries, with China on top of the list. On the other hand, as already recommended in our GEAB no. 108 (October 2016), we advocate once more to move away from Western sovereign bonds, which, unless central banks take particularly strong action, will see their yield rise and therefore their price fall. It is even not impossible to imagine that some notoriously insolvent countries will simply decide not to pay them back. As for emerging market bonds, although they may represent opportunities, extreme caution is required. The market is often fragile and can still be destabilised by external factors, such as sharp changes in the oil price, or dollar or euro levels, for example.
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