Investment Line is a regular investment bulletin produced by Mattioli Woods plc. The communication provides an update on funds, highlights some of the areas we are focusing on, and shares our thoughts on the issues of the day.
Though it feels as if markets are facing an inflection point, portfolios already look well positioned for the uncertainties ahead.
Excessive US exposure seems unwise to us given the valuations in that market and the rate pressures on the “growth” stocks. Other global markets would appear to offer better value and our preferences remain unchanged this month other than a slight reduction of Chinese equities for adventurous clients.
The political uncertainty in the UK is unlikely to move the dial a great deal. The domestic market presents interesting opportunities given switches in investment styles of late. For some the vulnerability to inflation will be too much to warrant further exposure and so it is for us.
The themes are a useful way of allowing for us to obtain focused US exposure in areas we believe present a compelling investment case rather than using a blanket exposure. The current blend of ideas looks sensible – healthcare has struggled but looks decent value and, along with global insurance, provides a relatively defensive allocation.
The weaknesses here are obvious and Treasuries have been under pressure from increasing rate expectations. The short end of the curve has faced significant headwinds and the uncertainties are likely to continue. Carefully selected corporate debt (of decent credit quality) and convertibles continue to feature in most portfolios.
The sector has enjoyed the recovery post the initial Covid-19 shock and can perform well in an inflationary environment. Along with infrastructure it provides a core real assets exposure.
It is important to be discriminating here – many of the protection vehicles will find it hard to navigate the uncertainties over inflation and interest rates so have to be selected carefully. Other alternatives present an opportunity to add some diversification and alpha and are included in portfolios in modest amounts.
Cash remains slightly elevated given concerns over some market valuations.
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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