Equity markets have remained strong over the last month but expectations look very elevated to us. We are not comfortable adding risk at the present time.
OVERSEAS EQUITIES
Emerging markets have enjoyed a strong run and the outperformance of the rest of the world relative to the US is considered by some to be a significant development. The weakness of the dollar has certainly been helpful in boosting risk sentiment and the reopening of China has acted as a further catalyst. We are adding an allocation to Latin American equities to adventurous portfolios, funded from the US. In some lower-risk portfolios, we are removing the overweight allocation to Japan.
UK EQUITIES
No changes this month. The UK seems to have avoided some of the worst predictions regarding economic growth and there is some hope around progress on the Northern Ireland protocol; however, significant challenges remain for the domestic economy. Larger cap names have continued to perform well given their international flavour.
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
As part of the improvement of credit quality within fixed income, we are removing the convertibles exposure in favour of investment grade bonds.
PROPERTY
Allocations are unchanged this month, with exposures looking reasonable given prospects for the asset class.
ALTERNATIVE STRATEGIES
We have a small range of options we like but they bring an extra dimension to portfolios.
CASH
Cash is reduced in some lower-risk portfolios to fund an increase in investment grade exposure. We are keeping our powder dry for the opportunities we think lie ahead.
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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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