Despite some isolated but better trading days in equity markets, we do not have the conviction to add risk to our portfolios at this time.
OVERSEAS EQUITIES
The focus is now going to be on what happens to earnings after the correction in valuation multiples which ensued over the first half. The ongoing upheaval will inevitably throw up pockets of value for us.
UK EQUITIES
The case for UK equities is unlikely to be materially affected by the outcome of the leadership election though concerns have been voiced over some of the tax proposals. Overseas investors are probably unimpressed by the political developments and a flood of monies is unlikely from this source. Longer term, some value is opening up especially in smaller names, but we are not adding yet.
SPECIALIST
No changes in this area. Clearly our thematic allocations are not immune to difficulties in markets, but they do provide defensive characteristics in some areas and allow us to focus our exposure.
FIXED INCOME
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
Commercial property, in its many hues, might yet face headwinds from recessionary forces but has been valuable in portfolios in recent times.
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 remains elevated – we might be close to a sensible time to invest some of it, though there is no particular rush considering the uncertain outlook.
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.
