Tactical change – 14 January 2016

20 January 2016
Trevor Greetham, Head of Multi Asset at Royal London Asset Management, has made a tactical change to the asset allocation of the Governed Portfolios (GPs) and Governed Retirement Income Portfolios (GRIPs). 

What's changing?

We are adding to equity exposure in the GPs and GRIPs to buy the dip in the markets, funding the move by selling bonds*. We are likely to gradually lighten up on exposure again later on when sentiment normalises. We expect a generally positive trend in equity prices over 2016 but with wide trading ranges and it feels like we’re towards the bottom.

Stock markets got off to a bad start to the year, reacting badly to renewed concerns around China. Our composite sentiment indicator has plunged to a level not seen since last summer’s sell off. Things could get worse before they get better but our analysis suggests that such a state of panic creates a good opportunity to buy stocks. We are encouraged to see the authorities in China showing a willingness to calm the markets and we don’t see small fluctuations in the yuan as evidence of an imminent collapse in the Chinese economy. Fear of China exporting deflation also looks misplaced as policy makers are trying to keep the currency stable against a basket of its trading partners’ currencies.

We expect global growth to pick up in 2016 as the effects of a low energy price and loose monetary policy boost consumer spending in the US and Europe. There are tentative signs that the global industrial cycle may be bottoming out. An upturn in business confidence would surprise a pessimistic consensus and see a move back into stocks.

We haven’t made any changes to our regional equity preferences where we remain overweight Europe and Japan and underweight the UK, Asia Pacific and the emerging markets.

Keep up to date with Trevor’s latest views

You can access up-to-date views from Trevor on the market and the movements of the Investment Clock on our Latest Investment Clock updates page.

Latest tactical positions

 Overweight NeutralUnderweight
Equities      
Corporate Bonds    
Index Linked    
Property    
High Yield    
Gilts    

Direction of arrows show change from previous tactical change.

*The increase in equity allocation within Governed Portfolio 7, has been funded by a reduction in the property allocation.

Last updated: 18 May 2016

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