According to Percival Stanion, head of asset allocation and chairman of the strategic policy group at the firm, while the team had not been expecting much from Europe, "even our expectations relative to the consensus seem overly optimistic as the strains on the European financial system grow, particularly in places like Spain".
In light of this, the multi-asset team has maintained its support for the US dollar and adopted a more cautious approach to equities, particularly those in economically sensitive areas such as materials and industrials.
Meanwhile, more defensively placed sectors such as healthcare have been upgraded.
The US is still seen in a favourable light by the Barings team as growth remains strongly underpinned. But public sector spending cuts could threaten output in the country in 2013, Stanion said.
In Asia Japan’s continued growth is encouraging, while China continues to disappoint. "The recent weakness in Asia’s largest economy has brought significant downward pressure on industrial commodity prices, including oil.
"More optimistic investors are still expecting an aggressive government stimulus programme and there have been more encouraging comments about accelerating infrastructure spending. But this might be too little too late," Barings added.
