- Much of our investment thesis has played out well so far this year.
- Developed market economies are neatly positioned on our investment clock framework, and look to be further boosted by the current deflationary trend.
- Following the ECB’s announcement last month of QE, long term inflation expectations have picked up in Europe. Whilst the committee questions the role of QE in this, we acknowledge the scope for Europe to surprise positively given the pessimistic sentiment that still prevails.
- The potential for interest rate rises in the US was also discussed following comments from Fed Chair Janet Yellen. The US remains the most likely candidate to exit ultra-accommodative policy measures first, with a June lift-off date still a possibility. This has the potential to disrupt the equity market, which now provides limited valuation support.
- The committee decided to reduce the overweight allocation to US equities, in order to fund an increased allocation to Fixed Interest and Absolute Return.
The developed world remains in a sweet spot from an investment perspective, with low inflation and slowly recovering economic growth. The recent trend of falling inflation, driven primarily by the declining oil price, has only enhanced this position. Within our investment clock framework, countries have been moving anti-clockwise recently, potentially extending the duration of the next growth phase.
Full article – Asset Allocation Debrief (Old scheme) – March 2015 (PDF)
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