Here’s how we are positioned in our flagship portfolios:
- Portfolios showed positive returns year-to-date. The key performance drivers remain:
- quality within fixed income, with higher-than-normal exposure to government bonds, and reduced exposure to high yield and emerging market debt;
- our selection of equity investments, as several technology stocks have performed strongly, combined with a low exposure to the banking sector where volatility remains high; and
- our strategic gold position.
- Despite the somewhat improved risk appetite in markets last week, we are still defensive in our asset allocation positioning. This means that, versus our typical long-term allocation, we own more high-quality bonds than normal (we remain overweight) and own less equities and low-quality bonds than normal (we remain underweight).
- While headline inflation is falling, core inflation is stickier than expected, which supports our existing position in inflation-linked bonds (US TIPS).
- Similarly, the ongoing reopening of China and strong data releases is underscoring our overweight position in Asia-Pacific (including Japan) equities.
- Our underweight equity position has been a slight headwind to performance given the rebound of the asset class. However, with central banks weighing up inflation risks versus financial stability risks, we don't believe it is time to add risk to portfolios yet.
Past performance is not a reliable indicator of future returns.