Uncertainty prevails and the stakes are high for investors – this does not feel like the time to increase risk.
OVERSEAS EQUITIES
Global equities continue to wrestle with inflation and recession fears. The mood remains pretty bleak which may be a sign that things will turn shortly but the prospect of earnings downgrades makes us cautious. Excellent opportunities will present themselves in most areas for those who are patient.
UK EQUITIES
The Truss administration has concocted a plan for energy prices, but it will be interesting to see if this affects yields and perceptions of the UK economy. The Bank of England may have to embrace a more hawkish stance in response to sterling and this could expose many of the underlying weaknesses in the domestic economy. Larger cap names seem like safer bets at the current time.
SPECIALIST
Areas like infrastructure and healthcare appear to be defensive compared to other sectors, although we do have riskier thematic ideas in our portfolios to retain a decent balance.
FIXED INCOME
The hawkish language from the Federal Reserve and other central banks naturally makes one fearful for the asset class but some attractive yields are now on offer and the prospect of a recession in many countries means things are not as bleak for some bonds as one might think. Small, select allocations are justified in portfolios.
PROPERTY
Markets have continued to fret about UK commercial property and also housebuilders. The economy looks challenged and it is unlikely the asset class will be spared but a carefully selected, less economically sensitive property exposure should continue to add value to portfolios.
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 are keen to deploy some of our cash but for now it does not feel that the time is right.
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.
Mattioli Woods plc is authorised and regulated by the Financial Conduct Authority.
