Investment Clock insights

RLAM multi asset tactical positioning


Nersen Pillay

7 March 2018

Our Investment Clock is in the later cycle ‘overheat’ phase, with strong global growth and more risk of inflation; commodities historically have tended to outperform in that environment.

Having reduced equity and high yield exposure towards the end of 2017, we have been adding to stocks since the end of January stock market weakness, given supportive global growth conditions remain in place.

Given robust global growth and inflation still remaining benign, we are overweight:

- Global equities (a position held since 2012); global high yield bonds, given  the low risk of stagflation
- Japan and emerging markets, which benefit from global growth
- The US, given the strength of the economy and tax cuts stimulating it
- Commodities, given they benefit in the overheat phase of the economic cycle and offer some inflation protection.

We are underweight:

- Government bonds, given the long bull market in fixed income is now more challenged as market concerns around inflation and interest rate risk return
- The UK, which has experienced some monetary tightening and still has Brexit uncertainty attached to it
- Europe, where unemployment remains high in the eurozone and we believe economic performance has been more a function of global growth rather than domestic strength.

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.