Asset allocation

Current views at a glance - July 2017

16/07/2017

KEY

Equities

 
 
 

UK

Less positive view given continued uncertainty over Brexit and concern over increasingly squeezed consumers.

 
 

European

Better economic activity with an undervalued currency and equity market.

 
 

North American

Full valuation and reduced hope of Trump policy boost.

 
 

Japanese

Better global economy helps but domestic economy is still disappointing.

 
 

Asia Pacific

Dollar headwinds fading and pick-up in global trade is helpful to Asia Pacific.

 
 

Emerging markets

Domestic challenges and weaker oil price may hold back emerging market equities.

Fixed income

 
 
 

Government bonds

We remain negative on GBP and euro bonds, however, US treasuries are more attractive given the normalisation of yields that has taken place.

 
 

Investment grade

Credit spreads provide some pick-up in yields but we prefer short-dated bonds.

 
 

High yield

High yield spreads are at an historically tight level so we would be wary of high yield spread duration exposure.

 
 

Inflation-linked

Inflation-linked government bonds remain more attractive than conventional government bonds and give protection against unexpected inflation.

 
 

Emerging market

Selectively, local emerging market bonds offer good interest rate and currency exposure.

Alternatives

 
 
 

Absolute: equity

Equity market dispersion should provide opportunities.

 
 

Absolute: fixed income

Lower liquidity and flatter rate profiles reduce the attractiveness of many strategies.

 
 

Absolute: macro

Increased volatility across many asset classes should counter flatter rate cycles.

 
 

Commercial

Post-Brexit concerns have resulted in the marking down of property but income characteristics are still attractive.

 
 

Precious metals

Gold is attractive as a diversifier, as portfolio insurance and as an inflation hedge.

 
 

Industrial metals

Ongoing excess supply is likely to weigh on prices for some time.

 
 

Energy

Oil continues to be volatile as politics and supply concerns dominate the market.

Cash

 
 
 

Cash

Cash does not yield much but gives opportunistic firepower.

Currencies

 

 

TERMS:

Spread - the difference in yield between a non-government and government fixed income security.

Duration - approximate percentage change in a price of a bond for a 1% change in yield.

This article is issued by Cazenove Capital which is part of the Schroder Group and a trading name of Schroder & Co. Limited, 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.

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Nick Georgiadis

Nick Georgiadis

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Simon Cooper

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