Diversification
3 min read 14 Jun 24
We’ve changed our tactical views. These changes were reflected in the portfolios in a rebalance instructed on 14 June 2024.
We continue to think the backdrop for stocks is positive and we are broadening our stance on equities by adding to Europe. We continue to hold more in the US and Japan and have less in bonds. The changes were reflected in a rebalance on the 14 June 2024.
The equity gains at the start of the year were very concentrated in a handful of US companies leaving the market looking a little lop-sided. We’re seeing a recovery in global manufacturing and we think there is a good opportunity for other markets to do well such as Japan, Europe and emerging markets. We’ve liked Japan for a while and continue to hold more but reduced our overweight position and added to Europe. While some US stocks are expensive, companies have delivered earnings above expectations to underpin their valuations and we expect this to continue.
The biggest risk for bonds is still inflation; if Central Banks can’t bring inflation lower for a sustainable period then bonds are unlikely to deliver capital gains. Investors now expect fewer interest rate cuts which is more aligned with what we expect. We still maintain our underweight stance as we think equities will do better. Our focus within fixed income remains on the yield bonds are generating rather than any expected capital appreciation.
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