Markets have staged another rally but it feels as if this is a distraction from the challenges which await in the first half of 2023.
OVERSEAS EQUITIES
The split of our global equity allocation remains unchanged. The rally in many markets has made some valuations even less attractive and less reflective of the issues to be addressed next year. We are thinking about where we will look to add risk when the time is right and are looking opportunistically for the areas of value which will emerge.
UK EQUITIES
Some calm has returned to the UK markets but prospects are challenged. Most investors think the UK is ‘cheap, but cheap for a reason’ and until this changes not a huge amount else is likely to.
SPECIALIST
These allocations have benefited from the dollar exposure which they bring and some of the more defensive areas such as global insurance and healthcare have been helpful in the more difficult months.
FIXED INCOME
We are adding to investment grade credit in the majority of portfolios. The market appears to be pricing in a level of interest rates for next year which is unlikely to be exceeded and therefore a lot of bad news is already reflected in the price. At last, fixed income is offering up a true alternative to equities.
PROPERTY
Exposure here does of course add in more vulnerability to a faltering UK economy but the allocations are diverse and position sizes are sensible given the risk-reward outlook.
ALTERNATIVE STRATEGIES
Few strategies meet our criteria here, but it may be that in a world of lower returns, alternative strategies become the real differential in terms of relative performance.
CASH
We remain patient – we continue to feel that we will be able to use our cash to take advantage of better opportunities ahead.
Investment Line is written and edited by members of the Mattioli Woods Group investment committee and is for information purposes. It is not intended to be an invitation to buy, or act upon the comments made, and all/any investment decisions should be taken with advice, given appropriate knowledge of the investor’s circumstances. The value of investments and the income from them can go down as well as up, and you may not get back the amount invested. Past performance is not a guide to future returns.
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