Asset allocation

Current views - March 2019

Our investment team assesses the prospects for a range of asset classes and currencies

08/03/2019

Asset classes

 
 
 

Equities

Reasonable valuations and moderating growth lead us to be neutral on equities.

 
 

Bonds

We prefer USD bonds to EUR and GBP bonds. More attractive valuations in US inflation-linked and emerging market bonds.

 
 

Alternatives

Attractive diversification characteristics compared to equities and bonds. Remain cautious on UK commercial property.

 
 

Cash

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

 

Key

Asset classes

 
 
 

Equities

Reasonable valuations and moderating growth lead us to be neutral on equities.

 
 

Bonds

We prefer USD bonds to EUR and GBP bonds. More attractive valuations in US inflation-linked and emerging market bonds.

 
 

Alternatives

Attractive diversification characteristics compared to equities and bonds. Remain cautious on UK commercial property.

 
 

Cash

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

 

Equities

 
 
 

UK

Brexit uncertainty continues to weigh on sentiment.

 
 

European

Slowdown in domestic economic growth and uncertainty around trade continue to be headwinds.

 
 

North American

Economic fundamentals are relatively attractive vs. rest of the world and earnings growth expectations have moderated.

 
 

Japanese

Concern about the impact of the upcoming consumption tax hike.

 
 

Asia Pacific

Slowing Chinese growth and trade tensions remain headwinds but Chinese stimulus should be supportive.

 
 

Emerging markets

Valuations and fundamentals look attractive relative to developed markets.

 

Bonds

 
 
 

Government bonds

US Treasuries are relatively more attractive given a more supportive Federal Reserve.

 
 

Investment grade

Returns are likely to be driven largely by government bond markets. While corporate spreads are close to post 2009 averages, we are mindful of increasing company leverage and the late stage of the economic cycle.

 
 

High-yield

Volatility will likely continue and will offer opportunities if spreads move sufficiently in either direction.

 
 

Inflation-linked

US inflation-linked government bonds are attractive compared to conventional ones and will outperform if inflation expectations rise again. UK linkers are attractive as a Brexit hedge.

 
 

Emerging markets

Emerging market bonds generally offer good value.

 

Alternatives

 
 
 

Absolute Return

We like the diversification characteristics of trend followers and long/short strategies.

 
 

Commercial property (UK)

Ongoing concern for the UK commercial property environment, but income characteristics remain attractive.

 
 

Commodities

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

 

Author

Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. 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.

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