The rally in global equities stalled in the third quarter of 2021 after a bout of disappointing economic data pointed to a slowdown in the pace of growth. At the same time, supply bottlenecks and surging energy prices contributed to concern about higher inflation. We believe the economic cycle is going through an adjustment phase to more sustainable growth rates and expect inflationary pressures to peak in the next 12 months. Therefore, we remain biased towards cyclical assets with the caveat that we expect limited returns over the next 12 months. While we increase our allocation to cyclical sectors, we seek a balance between early- and late-cyclicals and exposure to growth and value factors. With this in mind, we tilt late-cyclicals to a slight Overweight, while we selectively shift to Overweights in consumer discretionary and technology. Finally, we reduce our allocations to defensive sectors, which we expect to underperform.
Changes in allocations:
Get an in-depth Q2 report from our alternatives experts including their outlook, positioning, and insight on valuations, fundamentals, and trends.
Welcome to Uncommon Truths, Paul Jackson and Andras Vig’s regular in-depth look at the big topics impacting markets.
Welcome to our Tactical Asset Allocation hub. Here you’ll find a selection of the most recent research from Invesco Solutions. Read our latest analysis that covers market strategy and opportunities across various asset classes.
