Trevor has further increased our overweight in equities relative to corporate bonds and index-linked gilts, taking advantage of recent market weakness.
The Governed Portfolios and GRIPs have been overweight in equities for the last few years. With global growth above trend and inflation low, the Investment Clock model that guides our tactical asset allocation remains in the equity-friendly recovery phase.
Within equities we are overweight Japan and Europe, the two parts of the world in which central bank policy is particularly loose and where growth has been picking up. We also took US equities overweight in the latest move to reflect the bounce back from economic weakness over the winter.
We remain underweight in emerging markets and Asia Pacific and we have deepened our underweight in the UK. These positions reflect our expectation that US dollar strength will return as the Federal Reserve gets closer to raising rates and also concerns around Chinese economic weakness.
We are underweight credit and index-linked gilts in order to fund the equity overweight and also as we see upside potential to yields as inflation pressures start to build later in the year.
We remain neutral on property. We see a positive market outlook relative to bonds but more upside potential in stocks.
Direction of arrows show change from previous tactical change.
The property allocation within Governed Portfolio 7 has been reduced to increase the equity allocation as this portfolio has no exposure to fixed interest.