collins stewart spots defensive triggers

Collins Stewart Wealth Management has seen an edging upwards of its market stress indicator from 3.0 to 3.5 in the space of a week, prompting the firm to call for a shift to defensive asset allocation.

collins stewart spots defensive triggers


The firm said this upward move was an early indicator that defensive asset allocation among multi-asset portfolios would be prudent, as equity volatility has ticked up and asset correlations have not kept pace.

Robert Jukes, global strategist at Collins Stewart Wealth Management, said: “Although the indicator is not yet consistent with outright ‘stress’, tensions are beginning to appear. “Having risen to 3.5, experience tells us that it is more likely to continue rising towards stress than it is to revert to more normal conditions.”

The market stress indicator measures the state of global markets by observing how correlations between assets change as volatility does.

High volatility and high correlations imply a serious level of market stress, while low volatility and low correlations signal calm markets.

Collins Stewart keep an eye on 12 asset classes commonly held in multi-asset portfolios, including equities, bonds, property, commodities and currency and rates them from one to five in terms of stress levels.

On the scale one and two signify normal conditions, while four and five signpost troubled markets.

Jukes concluded: “On the macro front, we are still expecting much from the policy makers and central banks which leaves plenty of scope for market disappointment, particularly given the summer exuberance in risk assets and the more recent backdrop of a correction in equity markets.

"This macro uncertainty, global growth weakness and the challenging earnings season colour our strategic advice, which is to remain cautious.”



Latest Stories