INVESTMENT LINE: OUR CURRENT THINKING ON ASSET ALLOCATION - DECEMBER 2021

Omicron is causing major concerns for governments and societies but markets seem relatively relaxed so far. Our generally cautious view seems more than justified against this backdrop.

OVERSEAS EQUITIES

Persistent worries over China have led us to reduce exposure in some portfolios. We may yet see a swift recovery in the Chinese market, but the lack of transparency and the continuing risks mean that this looks, for now, more like an idea for adventurous investors. Otherwise, the global equities exposure remains unchanged.

UK EQUITIES

The UK is now facing a potentially very serious situation regarding Omicron and the economy is likely to be held back if further restrictions are introduced. Still, these problems are not unique to the domestic market and the current allocations look sensibly sized for all but the very worst of outcomes.

SPECIALIST

Given the uncertainties surrounding the direction of monetary policy and financial markets, our specialist allocations look like achieving a strong balance of growth and value ideas and access to areas which offer both protection and exciting growth prospects.

FIXED INCOME

It is only natural to be concerned about the fixed income space given the inflationary threat, but markets seem stable after the latest Federal Reserve announcement. This month sees us reducing our emerging market debt holdings for balanced investors with convertible bonds the beneficiaries.

PROPERTY

Property and infrastructure should both offer some security in a more inflationary environment, our allocations look sufficient.

ALTERNATIVE STRATEGIES

Allocations to alternative and protective strategies remain unchanged this month.

CASH

Slightly increased this month following the reduction in China exposure. We will look to reinvest the proceeds in the New Year.

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