Equity markets have been surprisingly strong over the past few weeks, but the challenges ahead are very real – our positioning is largely unchanged.
Direct exposure to China is being removed from Adventurous’ portfolios following our moves elsewhere. The market may look cheap in some areas, but political risk has risen high enough that we are forced to look for opportunities in other areas.
UNITED KINGDOM EQUITIES
The United Kingdom offers opportunities, but the sectors of the market most exposed to the vagaries of the British economy itself may prove vulnerable. Inflation has set in, as elsewhere, and the pressure on the cost of living due to energy and food prices is significant. Nonetheless, market value elements provide some reassurance as rates rise.
We have taken a close look at the energy sector over the past few months and have now decided to add exposure for adventurous investors. Basically, this focuses on the opportunity presented by oil producers and explorers instead of taking a direct position on the price of oil.
Recent falls here are far from encouraging. The US Federal Reserve adopts a more hawkish tone and the bond market shows its obvious weaknesses. Still, tougher times ahead could of course rejuvenate the investment case for Treasuries and some opportunities also remain in the broader fixed income space.
Real estate has been very helpful lately, and REITs generally hold up well in stagflationary environments, making our current exposure reasonable.
Vehicles that meet our requirements are likely to be able to make a contribution in markets plagued by uncertainty and heightened volatility, but in truth, not many are suitable. Allocations remain targeted and tailored to clients’ risk appetite.
Cash is maintained at current levels. Ideally, we stay as fully invested as possible, but in a harsh environment, keeping the powder dry can bring its rewards.
Mattioli Woods plc published this content on March 24, 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unmodified, on Mar 24, 2022 4:41:04 PM UTC.