The cocktail or risks facing markets has convinced us to reduce risk in lower risk portfolios this month.
OVERSEAS EQUITIES
Vulnerability across most global equity markets means that for our more cautious investors we are trimming positions. We continue to reduce our China exposure elsewhere, with the UK and insurance benefiting in some portfolios.
UK EQUITIES
The UK continues to look attractive on valuation grounds and looks well positioned given the switch in investment styles seemingly underway within the market. The UK economy itself faces some significant challenges from inflation and reduced real household income, so exposure must be carefully focused.
SPECIALIST
Growth names which are likely to be impacted by an aggressive rate rising cycle do look vulnerable and we are reducing technology exposure in some lower risk portfolios as a result. This is not to say that we are going “all in” on the value style and our approach remains pretty balanced. Gold is proving its worth in these testing times.
FIXED INCOME
We are not making further changes this month though the outlook for fixed income continues to look challenged. The possibility of Treasuries becoming attractive as diversifiers later in the year is real, but we certainly have enough exposure for now, and further reductions to bond holdings in the coming months are possible, especially in credit.
PROPERTY
Property was a valuable allocation in a very tough January and continues to look attractive against the current backdrop. We are introducing a global property securities allocation for portfolios higher up the risk spectrum.
ALTERNATIVE STRATEGIES
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.
CASH
Cash is further increased in lower risk portfolios. In Defensive and Cautious the level now looks significantly elevated but for these clients, avoiding losses and keeping dry powder justifies this positioning.
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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