As part of our focus on providing a high quality, personalised investment service, we look to support our investment managers in their decision making when it comes to constructing client portfolios. Our Asset Allocation Committee is one example of this, via their monthly output.
Fixed Income
|
UK Government Bonds |
|
We see the re-emergence of inflation as a topic in the US and think that the same drivers will arise here. We prefer shorter dated index linked for the time being. |
|
UK Corporate Bonds |
|
Investment grade bonds with the shortest maturities are preferred, within the constraints of income requirements. |
|
UK Indexed Linked Bonds |
|
As with Gilts, we prefer shorter dated index linked bonds. GBP weakness will only work to boost inflation. |
UK Equities
|
UK Financials |
|
The sector could benefit in the short term from the strength of the UK economy.
|
|
Consumer goods |
|
We like this sector for its defensive qualities, but are cautious on valuation of overseas earners. |
|
Oil & Gas |
|
Given the unfavourable supply/demand dynamics we do not expect any improvement until we see concrete production cuts announced. We do think we have seen the bottom in oil prices. |
|
Consumer Services |
|
Some interesting opportunities in Media and Leisure exist; we are still positive on consumer spending. |
|
Industrials |
|
Recent strength in the sector could be an opportunity to boost core holdings.
|
Other Equities
|
US |
|
We remain concerned by extended valuations and slowing earnings momentum as QE matures and the headwind of past USD strength is felt. The threat of a forced rate reversal may cause short-term volatility. |
|
Europe |
|
We continue to see some upside in the Eurozone generally; Europe is currently enjoying the tailwinds of QE and depressed borrowing costs and so we favour this region over the US. |
|
Japan |
|
We have little conviction as to Japan’s economic outlook as QE appears to have achieved limited long-term benefits for the underlying economy. |
|
Asia/China |
|
We continue to remain cautious on the Chinese economy as it undertakes a cyclical deleveraging, post an extensive domestic property boom and overcapacity. Any further devaluation of the yuan would trigger similar devaluations elsewhere in Asia. |
|
Emerging Markets |
|
We remain wary of EM currencies given the ongoing rally in the USD, although indecision by the Fed over future interest rate moves might see a relief rally. |
Alternatives
|
Property |
|
The preference is property companies to open-ended funds, but caution on liquidity. |
|
Absolute Return |
|
Exposure might be appropriate given current market conditions. We suggest caution on the “yield hunt” and are wary of lower quality products. |
|
Infrastructure |
|
As with absolute return, investors should be cautious when looking for yield and pay close scrutiny to the quality of the investment product. |