Major central banks in developed markets will have the flexibility to maintain their accommodative monetary policies throughout 2014 against a benign inflationary environment, according to Ben Gutteridge, head of funds research at the wealth manager.
Risk is good
This should be a powerful tailwind for higher risk assets such as stocks and lower quality bonds, despite more expensive valuations, he said.
In its recommendations for the next year, Brewin Dolphin has advocated equity funds in the UK, US, Europe and Japan.
In the UK, Brewin has tipped River & Mercantile UK Smaller Companies, which has been underpinned by both strong stock selection and sector allocation calls.
Old Mutual’s US Dividend fund is the favoured contender in the US market, investing more heavily in industrials and financials – both of which are expected to outperform as confidence in the recovery grows.
In Europe, Brewin Dolphin said it the expected the Neptune European Opportunities fund to be well placed to benefit in 2014.
Meanwhile as Japanese authorities continue striding towards inflation targets, the firm highlighted the Schroder Tokyo Hedged fund, which is currency hedged and exhibits a marginal value bias.
Spice up your life
For those wishing to spice up their portfolio in 2014, Brewin Dolphin has pointed towards the River & Mercantile World Recovery fund, in which Europe and Japan dominate its exposure. More broadly, this strategy invests in out-of-favour areas within the market which are likely to bounce back and benefit the most from an improved global environment.
Gutteridge said they would not be making a recommendation in emerging markets, adding that while the asset class could benefit indirectly by the stronger developed markets, as a region it still faced too many challenges.
“Issues the asset class must contend with include the adjustment to a less commodity intensive growth path for China, as well as the initiation of US monetary policy normalisation; the former impacting national revenues, and the latter increasing the cost of funding,” he said.
