Asset allocation

Current views - March 2018

Our Investment team provide their current views on asset classes based on the status of markets.

20/03/2018

KEY

Asset classes

 
 
 

Equities

Growth and inflation underpins a positive outlook for equities, however valuations cannot be described as cheap. The risk of a trade war is an increasing concern.

 
 

Fixed income

We prefer USD versus EUR and GBP, and prefer inflation linked bonds to nominal bonds.

 
 

Alternatives

Attractive diversification characteristics compared to equities and fixed interest.

 
 

Cash

Cash has defensive and opportunistic qualities in uncertain and volatile markets.

 

Equities

 
 
 

UK

The economy continues to lag the expansion seen in other markets and political uncertainty remains. However, we are mindful of the market derating and that investors are underweight in the UK equity market.

 
 

European

Strong cyclical upturn in economic growth is supportive, although the strength in the euro may temper performance.

 
 

North American

Potential for a strong increase in growth and earnings is offset by higher valuations.

 
 

Japanese

Stronger growth and inflation after many years of disappointment is driving a recovery in corporate earnings, and the yen remains relatively undervalued.

 
 

Asia Pacific

The increase in global trade is helpful to Asia Pacific although they performed strongly in 2017.

 
 

Emerging markets

Continued global growth should be supportive to emerging markets that are cheap relative to developed markets.

 

Fixed income

 
 
 

Government bonds

We remain negative on GBP and EUR bonds but US Treasuries are becoming relatively more attractive given the normalisation of yields that is taking place.

 
 

Investment grade

Credit spreads provide a small pick-up in yields but are at a historically narrow level.

 
 

High-yield

High-yield credit spreads are at a historically low level so we remain wary.

 
 

Inflation-linked

Inflation-linked government bonds remain relatively attractive and provide a hedge against unexpected higher inflation and any currency weakness.

 
 

Emerging markets

Selectively, local emerging market bonds offer good interest rate and currency exposure.

 

Alternatives

 
 
 

Absolute

Increased volatility and dispersion should provide opportunities. We favour trend followers and long/short strategies to fixed interest.

 
 

Commercial property (UK)

Post-Brexit concerns have resulted in the marking down of property valuations, but income characteristics remain attractive.

 
 

Commodities

Gold is attractive as a diversifier, portfolio insurance and an inflation hedge.

 

Author

This article is issued by Cazenove Capital which is part of the Schroder Group and a trading name of Schroder & Co. Limited, 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.

Contact Cazenove Capital

To discuss your DFM requirements, or to find out more about our services and how we can help you, please contact:

Nick Georgiadis

Nick Georgiadis

Head of DFM Team nick.georgiadis@cazenovecapital.com
Simon Cooper

Simon Cooper

Business Development Director simon.cooper@cazenovecapital.com