Investment Clock insights

Current multi asset positioning


Nersen Pillay

13 November 2018

October has, once again, been a volatile month and our Sentiment Index reached extreme oversold levels as the equity market was weak after the bond market indicated more inflation and interest rate risk in the global economy.
Global Stock Prices and RLAM Investor Sentiment Index

October has, once again, been a volatile month and our Sentiment Index reached extreme oversold levels as the equity market was weak after the bond market indicated more inflation and interest rate risk in the global economy.

Global Stock Prices and RLAM Investor Sentiment Index

Source: Thomson Reuters Datastream as at 26/10/2018

Our Investment Clock in its mild stagflation phase indicating moderate growth but some inflation risk; however, global growth is still positive and we do not see a US recession in the next year while interest rates are not expected to rise sharply in any major economy. The environment is tricky but constructive for growth assets.

The Investment Clock

In Stagflation

Source: RLAM. For illustrative purposes only

Given global growth is still positive and not significantly challenged by only relatively small interest rate increases expected, we moved from around neutral to an overweight equity position in October market weakness when our indicators showed oversold markets. We retain an overweight position in short duration high yield bonds and stay neutral in property. Commodities have been moved to a small underweight position as they tend to do best when the clock is in its “overheat” phase, when growth and inflation are both stronger; they also do not benefit from a stronger US dollar. We continue to be underweight fixed income given UK and US interest rates are rising gradually.  In terms of equity regions, we remain overweight the USA, because of its strong growth relative to other areas, and Japan, which benefits from a stronger US dollar with its successful export sector.  We moved underweight emerging markets earlier in the year because it tends to suffer when the US currency is strong (given debt held in dollars) and soggier global growth. We remain underweight the UK, given Brexit uncertainty, and  Europe, given renewed eurozone concerns driven by uncertainty surrounding Italian fiscal policy and weaker growth. 

Where we stand

Overweight equities, high yield

Underweight bonds and emerging markets

Weightings may vary according to tactical asset allocation and the fund may invest outside of indicated asset classes as the manager sees fit. The views expressed are the author’s own and do not constitute investment advice.

Source: RLAM. Tactical positions as of November 2018

Past performance is no guide to the future. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.