Month: June 2021

Finanical advice.

We are entering a higher risk phase of the equity rally, with global equites having rallied 89% off their March 2020 low, and are now 23% above the pre-COVID peak. Valuation metrics are elevated and equity sentiment is bullish. Globalisation headwinds are mounting, inflation pressures are rising, taxes are about to go up, and regulation is set to become more burdensome for corporations. Against that backdrop, there is not a lot of wiggle room for markets if something goes wrong, either an unanticipated shock or otherwise.

Nevertheless, the global economy is still in the early phases of a reopening that is very likely to see strong job growth. Households are flush with savings, and there is no prospect of rate hikes anytime soon. Almost every cycle, a meaningful growth slowdown is preceded by Fed rate hikes, with forecasts for the first rate hike predicting this will not happen through 2023. In an environment of strong economic growth, it is likely that the corporate profits continue to move higher, and given how tightly linked profits are to equity market performance, that bodes well for the equity outlook. As such we expect to see further equity market upside.

The key details of this rebalance are as follows:

We maintain conviction on our current views on asset allocation and funds selection, and as such no additional tactical changes were implemented this month.
Overall our Asset Allocation Committee continue to maintain an overweight equity position, with a modest preference for UK equities, emerging markets and Europe.