INVESTMENT LINE: OUR CURRENT THINKING ON ASSET ALLOCATION – FEBRUARY 2022

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The cocktail of risks facing the markets convinced us to reduce risk in low-risk portfolios this month.

OVERSEAS ACTIONS

The vulnerability of most global equity markets means that for our more cautious investors, we are reducing our positions. We continue to reduce our exposure to China elsewhere, with the UK and insurance benefiting from this in some portfolios.

UNITED KINGDOM EQUITIES

The UK continues to be attractive from a valuation perspective and looks well positioned given the shift in investment style apparently underway in the market. The UK economy itself is facing significant challenges from inflation and reduced real household income, so exposure needs to be carefully targeted.

SPECIALIST

Growth stocks that could be hit by an aggressive rate hike cycle look vulnerable and we are therefore reducing exposure to technology in some low-risk portfolios. This does not mean that we are going “all in” on the value style and our approach remains fairly balanced. Gold proves itself in these difficult times.

FIXED INCOME

We won’t be making any other changes this month, although the outlook for fixed income continues to look challenging. The possibility of Treasuries becoming attractive as diversifiers later in the year is real, but we certainly have sufficient exposure at the moment, and further reductions in bond holdings in the coming months are possible, particularly in credit.

GOODS

Real estate was a valuable allocation during a very difficult January and continues to look attractive in the current environment. We are introducing a global allocation to real estate securities for portfolios higher in the risk spectrum.

ALTERNATIVE STRATEGIES

Vehicles that meet our requirements are likely to be able to make a contribution in markets plagued by uncertainty and heightened volatility, but in truth, not many are suitable. Allocations remain targeted and tailored to clients’ risk appetite.

CASH

Cash is further increased in low-risk portfolios. In Defensive and Cautious, the level now seems significantly high but for these clients, avoiding losses and keeping the powder dry justifies this positioning.

Warning

Mattioli Woods plc published this content on February 24, 2022 and is solely responsible for the information contained therein. Distributed by publicunedited and unmodified, on February 25, 2022 09:31:05 UTC.

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