Asset allocation

Current views - December 2017

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

13/12/2017

KEY

Equities

 
 
 

UK

There are concerns over continued economic strength in light of uncertainty around Brexit and the tailwind from weaker sterling may be in the past.

 
 

European

There is continued strength in the EU economy. Equity markets are relatively attractive, although given their performance already this year we have tempered our enthusasim in the short term.

 
 

North American

A stronger economy, a weaker US dollar and good earnings growth is offset by a fuller valuation.

 
 

Japanese

Strong global trade and household consumption support growth, while inflation is also gently picking up.

 
 

Asia Pacific

The weak dollar and pick-up in global trade is helpful to Asia Pacific.

 
 

Emerging markets

Similar to Asia Pacific, stronger earnings and less dollar pressure is positive for the region.

 

Fixed income

 
 
 

Government

We remain negative on sterling and euro bonds. US treasuries are becoming more attractive given the normalisation of yields that has already taken place.

 
 

Investment grade

Credit spreads have provided some pick-up but we prefer short-dated bonds.

 
 

High-yield

Credit spreads are at a historically tight level so we are wary of high-yield spread duration exposure.

 
 

Inflation-linked

Inflation-linked government bonds remain more attractive than conventional government bonds and give protection against any inflation surprise.

 
 

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 flatter 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

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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