Asset allocation

Current views - January 2018

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

08/01/2018

KEY

Equities

 
 
 

UK

Concerns over continuing economic strength in light of Brexit and that the previous tailwind from weaker sterling may be behind us leads to a more cautious stance.

 
 

European

Strong cyclical upturn in economic growth is supportive but investors already positioned for this.

 
 

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 earning level.

 
 

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

We remain negative on GBP and euro 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 but are at a historically narrow level.

 
 

High-yield

High yield credit spreads are at a historically tight level so we are wary of excessive exposure.

 
 

Inflation-linked

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

 
 

Emerging market

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

 

Alternatives

 
 
 

Absolute: equity

Increased volatility and dispersion should provide opportunities.

 
 

Absolute: fixed income

Lower liquidity and flatter rate profiles reduce the attractiveness of many strategies.

 
 

Absolute: macro

Increased volatility across many asset classes should counter lower rate cycles.

 
 

Commercial property (UK)

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

 
 

Precious metals

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

 
 

Industrial metals

Ongoing excess supply is likely to weigh on prices for some time.

 
 

Energy

Oil continues to be volatile as politics and supply concerns dominate the market.

 

Cash

 
 
 

Cash

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

Author

This article is issued by Cazenove Capital which is part of the Schroders 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

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John Gordon

John Gordon

Business Development Director
Telephone:
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James Gladstone

James Gladstone

Head of Wealth Planning
Telephone:
james@cazenovecapital.com