Data key as wealth managers gear up for volatile summer
By International Adviser, 1 Apr 16
Like Janet Yellen’s Federal Reserve, it would appear that UK wealth managers are planning to be very data dependent in the second quarter.
“We are unlikely to make a big call over the quarter. We have traded at the margin recently trying to make something out of the volatility and sentiment but staying true to our longer term convictions.
“When the FTSE fell back, we started to see some value and took a slightly overweight stance (which we just took off). While we were playing sentiment, which hit extremely bearish levels, we were also content to buy equities at that level because, given the economic outlook, some value was emerging.
Thus, we could justify buying on fundamentals despite hoping for a trade. With the bounce, the valuation argument became less compelling so we unwound it.
In the second quarter, we would expect more of the same. It is hard to justify too much equity capital upside from here so if we see another 10% or so, we’d probably take an underweight stance. Similarly, if we test recent lows we’d look to top up.
In terms of our fixed income allocations, with central banks in uncharted territory, we find it hard to predict what central bankers are going to take into account when setting policy. In this environment, we are staying broadly neutral.
Data Points
We’ll stay focussed on OECD leading indicators, corporate earnings prospects and inflation. Leading indicators stay stubbornly weak in key markets like UK and US, slightly more constructive in Europe. Emerging markets are mixed.
Our current view is “OK” growth (below trend but positive), but slow growth does mean we’re only ever a few mis-steps or external factors away from a recession. To be fair, normally it is policy factors that deliver the final straw for a recession, and bankers are erring the side of loose policy for now.
Tags: Investec | Janet Yellen | Miton Optimal | Rathbones | Thomas Miller Investments
