Burgess said the data was better in terms of sentiment, which meant he would keep a close eye on the region for meaningful earnings upgrades, but given the political uncertainties and risks, he was holding fire on acting just yet.
He also said he expected valuations to be hit in investment grade credit given the expected rise in sovereign yields, and so had been reducing his large overweight in recent weeks.
“We remain constructive on high yield, and while market liquidity is thin, valuations are supported by the shorter duration of the asset class relative to investment grade,” he added.
The multi-asset portfolios run by the group have seen returns boosted by their large overweight positions in UK equities, which will remain intact.
Burgess said the FTSE All-Share produced a sterling total return of 6.8% in July, with the Mid 250 index driving that gain, which was up more than 20%.
In addition to the UK, Threadneedle has favoured Pacific ex Japan, emerging market equities, and Japanese equities. While he conceded the group’s bullish position on emerging markets has worked against its portfolios year-to-date, the pain has been eased by success in other asset classes.
“Moreover, given where valuations are now, we do not think it makes sense to start unwinding this position. In the UK, we continue to regard equity valuations are attractive and further support comes from the UK’s high proportion of overseas earnings, which gives the UK leverage to the global recover,” he added.
