Investors face a reality check as the effects of higher rates ripple through the financial system and create unexpected consequences. We remain extremely vigilant.
OVERSEAS EQUITIES
Markets have reacted as one would expect to the news around the US banking system but other than the financials themselves, things have not spun out of control. We don’t see any reason to change our current geographical split in the equity space.
UK EQUITIES
The UK economy is holding up a little better than feared but events elsewhere could still determine our fate in the short term. The stability of large cap in these challenged times will likely hold greater appeal than that of smaller companies but we look forward to a time when the stars align for the latter, and we are currently retaining allocations.
SPECIALIST
At times of elevated market stress, it is natural to want exposure to more defensive sectors of the market with sustainable long-term stories and our thematic allocations achieve this. We have discussed energy equities in detail, given their attractive valuations even based on lower commodity prices, but the prospect of recession means we choose to wait. If rates are cut with inflation still stubbornly high, gold should serve portfolios well.
FIXED INCOME
The truly remarkable levels of volatility in the bond markets and the prevailing economic and policy uncertainties justify our emphasis on sovereign and investment grade holdings.
PROPERTY
Property faces significant challenges but allocations are not excessive. If policy tightening is slowed or even reversed this should be helpful but headwinds remain.
ALTERNATIVE STRATEGIES
We have a small range of options we like but they bring an extra dimension to portfolios.
CASH
Cash looks like a very sensible allocation now. Rates are decent and the optionality it presents for when opportunities occur should not be underestimated.
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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.
Mattioli Woods plc is authorised and regulated by the Financial Conduct Authority.
