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.
We are maintaining positioning this month after the risk reduction exercise in May. It is difficult to form a strong case for adding more risk at this time.
Global equities have seen valuation multiples fall significantly but the earnings estimates that prices are based on seem rather optimistic considering the possibility of a recession in many areas.
Very little positive news on the economy but the larger cap names listed here could continue to outperform if sterling suffers the fate that many see for it, i.e. weak against the US dollar.
The removal of some of the more growth-style equity exposure last month has altered the mix of the allocation here to some degree. Our favoured areas remain unchanged on a long term view and this month sees no more changes.
US treasuries look to be about the best bet here given the economic uncertainty, but clearly the possibility of an aggressive Federal Reserve could create further volatility. We have credit exposure as well, but it is selective given the recessionary conditions which might materialise.
Property might come to the attention of asset allocators if recessionary fears gather more momentum – for now it is being viewed as a useful real asset in a world of elevated inflation.
Those vehicles which meet our requirements are likely to be able to make a contribution in markets beset with uncertainty and increased volatility, but in truth there are not that many which are suitable. Allocations remain focused and tailored to client risk appetite.
In the current environment, holding extra cash for protection is more than justified. Yes, inflation is unkind to cash, but it is to all asset classes and not falling in nominal terms is an attractive characteristic, for now at least.
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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