Insight

The Big Picture - Global Asset Allocation 2023 Q2

The Big Picture - Global Asset Allocation 2023 Q2

Our economic cycle analysis suggests we are in a contraction regime, which pushes us to a more defensive stance (reinforced by ongoing problems among banks). We believe cash now offers relatively attractive rates, while bringing diversification. Within our Model Asset Allocation we boost cash to the Maximum, while reducing gold to Zero, equities to further Underweight and real estate (REITs) to Neutral. The relatively conservative stance is balanced by having a regional bias towards emerging market (EM) assets.   

Model asset allocation 

In our view: 

  • Cash rates are higher and offer diversification. We increase to the Maximum.
  • Corporate investment-grade (IG) yields attractive but spreads may widen further. We remain Overweight.
  • Corporate high-yield (HY) attractive despite risk of wider spreads/higher defaults. We remain Overweight.
  • Government debt outlook dimmed by the recent fall in yields. We remain Neutral.
  • Real estate (REITS) offers the best returns but with risk. We reduce to Neutral.
  • Equities are handicapped by economic slowdown and bank sector risks. We go further Underweight.
  • Gold has been strong and now appears expensive. We reduce to zero.
  • Commodities are expensive and cyclical. We remain at zero.
  • Regionally, we favour EM assets.

Our best-in-class assets (based on 12m projected returns) 

  • EM government bonds
  • US IG
  • Chinese equities
  • GBP cash

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