Markets have started the new year in a confident mood but are likely to face challenges as economic uncertainties persist. The time to extensively add to risk has not yet arrived in our opinion…
OVERSEAS EQUITIES
Our asset allocation committee continues to debate the equity split across the various geographies. Asia seems well-positioned to benefit from the recovery in China (while allowing for the avoidance of over-exposure to China listed names and political risk there). Valuation is still a stumbling block in the US and many investors have begun to make the move away to other global markets. Japan is something of an unknown, with heightened uncertainty over the country’s rate policy and currency but at least it is relatively inexpensive. Europe is gaining interest among some investors and has performed admirably given the challenges of last year but there remain question marks over policy and some concerns Italy or others may see financial strife later this year.
UK EQUITIES
UK large cap has continued its strong run and small cap names may enjoy a better year than last. Given the balance of risks and economic outlooks here and elsewhere, allocations seem sensibly sized.
SPECIALIST
Our thematic focus was rewarding last year and we continue to like the insurance and healthcare themes for their defensive characteristics in these uncertain times. We will continue to look for new ideas but finding themes that have true merit as opposed to a ‘gimmicky’ marketing appeal is not a common event.
FIXED INCOME
We are making some further additions to quality fixed income for some investors, having begun the process of increasing exposure to the asset class over recent months.
PROPERTY
The area has enjoyed a decent period of late and we are adjusting holdings only for the most defensive investors, to enable the switch into fixed income.
ALTERNATIVE STRATEGIES
We are changing exposure in some portfolios, using a more defined returns approach focused on structured products, though a convertible bond strategy is retained for others.
CASH
Slightly reduced to add to fixed income in some portfolios but we remain comfortable with higher allocations, waiting for some better opportunities.
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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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