Gold could be driven higher this year, believes Smith, by the Bank of Japan and the ECB expanding their balance sheet and monetary policy programs.
“That could be both positive for the dollar and also positive for gold which tends to have some correlation to the size of Central Banks balance sheets’ globally,” he said.
Meanwhile, Smith explained Rathbones is still overweight the US and “that will continue to be a market leader for the next quarter or two”.
“We’re still overweight Japan although that hasn’t served us very well over the past six months. Japan has borne the brunt of China related jitters (as China accounts for 15% of Japan’s exports).”
That said, Smith points out that Japan still benefits from China’s middle class consumer boom and the subsequent Chinese tourists in Tokyo. Once the negative sentiment subsides, that should benefit Japan. It is also about the reforms in coroprate governance.
Japanese company management are distributing an enormous amount of cash back to shareholders.
More people want to buy Japanese equities as prices rise, Smith said: “That’s a story which is separate to global macro and should provide some exposure. Although admittedly during the past six months it hasn’t really played out the way we hoped.”
Smith further explained that Rathbones is underweight Latin America, with the argument that if the Dilma story continues to play out, that will be bad news for Brasil as companiess don’t want to go through courts, and, “that they’re geared into the wrong part of the China story”.
