Fundamentally our outlook is unchanged. A lot of hope looks to be baked into asset prices, which means our caution is maintained.
OVERSEAS EQUITIES
Our geographical preferences are unchanged – US equities have defied the disbelievers but look very richly priced to us. Little help is coming from China where the economic data consistently disappoints. Asia is vulnerable to this, but we retain positions given the long-term prospects.
UK EQUITIES
The most recent inflation numbers showed some sort of progress but achieving sustained falls might be difficult with or without a recession. Still, reducing exposure looks like an overly bold move given the attractive valuations and discount to other equity markets.
SPECIALIST
We continue the process of adding to global equity income in portfolios given our macroeconomic outlook. We believe this will provide a useful ballast in the event of a recessionary period without us having to reduce equities further. Gold equities have not performed as we had hoped, and we are removing exposure. Infrastructure continues to be troubled by higher rates and we are reducing holdings across most models.
FIXED INCOME
The relative appeal of the asset class is strong, and we are adding to the emerging market debt positions which we initiated last month.
PROPERTY
Property is exposed to interest rates in a similar way to infrastructure but with greater economic sensitivity risk. This said, valuations are very cheap, so we are only making modest reductions in our positions this month as we address the ongoing threat from rates staying higher for longer.
ALTERNATIVE STRATEGIES
We have a small range of options we like, which bring an extra dimension to portfolios. The environment has posed challenges even for ideas in this space.
CASH
We have focused on enhancing the quality of our fixed income and bond allocations rather than further increasing cash.
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Investment Line is written and edited by Chief Investment Officer Simon Gibson and Investment Strategist Richard Smith 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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