Speaking on the quarterly asset allocation changes to its tactical investment solutions range, Parmenion CIO, Simon Bretty said, the recent strength in the dollar has hindered sales and growth rates of the last few quarters.
This led to the firm moving its tactical asset allocation from neutral to underweight in the region at its last quarterly investment meeting.
“Increasingly, this appears to be impacting earnings, which has led us to look for better opportunities in other asset classes.”
According to Brett, two areas where such opportunities lie are emerging markets and in Japan.
Within emerging markets, which the firm moved from a neutral to an overweight position, Brett said the significantly lower oil price is expected to allow central banks to adopt more accommodative strategies because of a weaker inflation outlook.
“If recent dollar strength starts to weaken then Emerging Markets are likely to be a net beneficiary,” he said.
The other area of focus is Japan, where the firm has been active for some time, but where further increased its allocation during the latest asset allocation meeting, moving from single overweight to double overweight – the most overweight the tactical allocations can be.
“Although Japan’s economy has stagnated for many decades, Japan’s prime minister, Shinzo Abe, is committed to recovery and continues to enjoy strong political support…Abenomics has helped Japan become one of the best performers over the last year.
Despite this, relative to other asset groups, valuations appear to be attractive and strong earnings growth is encouraging.”
