As a result of this, Heartwood Investment Management’s investment director said, the firm is holding “a reasonable level of liquidity” to take advantage of the coming volatility.
While the firm expects both global growth to be stronger in 2017 than in previous years and corporate profitability to improve, such fundamental change takes time. And, he pointed out, market expectations have raced ahead of reality.
“Policy uncertainty – whether driven by Trump, Brexit or national elections in Europe – will continue to aggravate markets and may potentially be a source of disruption,” he said.
In terms of current allocations, Absolon said, despite sterling’s recent dramatic falls, the firm is not yet ready to move money back into the UK. Instead, it continues to prefer other developed economies.
At an equity level, the firm moved overweight the US following Donald Trump’s election, but given the short term risks, Absolon said there is currently “no desire to add further” to the position. Especially given that the current weighting is greater than the firm has held for some time.
It also remains overweight the cyclical markets of Japan and Europe and is keeping a sharp eye on emerging markets.
“We are not yet ready to add to our emerging markets exposure, given vulnerability to headwinds in the near term. However, we remain optimistic on a longer term view and would use any weakness as an opportunity to add,” he said.
