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Tactical Asset Allocation Update from Fidelity Solutions January-February 2015: Positioning for lower inflation

Nyhet   •   Mar 04, 2015 17:26 CET

Positioning for lower inflation

Inflation is at its lowest since the financial crisis, likely to fall further in coming months. Thirteen central banks have announced measures so far this year, and with growth above trend, this disinflationary back-drop is good news for both stocks and bonds. We have reduced our underweight to commodities with oil supply likely to tighten this year on the back of capital spending cuts. Europe looks set to benefit from low interest rates, a weaker currency and lower oil prices, and we have reduced our US overweight as dollar strength puts pressure on earnings.

Lead indicators in focus

Growth

  • Our global growth scorecard is marginally negative. The US is healthy, while Japan is mixed and EMs are clearly slowing. Europe shows signs of acceleration, but from a low base. Central banks are acting, with a powerful ECB programme announced, the BoJ already easing aggressively and EMs following suit. The oil price drop is likely to boost consumption, and growth should pick up in 2015.

Inflation

  • Our global inflation scorecard is still pointing down, with a positive impact on both stocks and bonds. The outlook moving forward depends on how real growth develops and how the Fed reacts to the disinflationary shock.

Current Asset Allocation positioning

  • We are overweight both equities and bonds in response to low inflation and loose monetary policy. Consumer Discretionary and Technology sectors benefit from low oil prices and dollar strength so are overweight, while we remain underweight commodity-sensitive Materials and Energy.
  • US data has softened, leading us to reduce our overweight, while overweights in Japan and Europe reflect expected boosts from stimulus. We remain underweight EMsdue to commodity-reliance and the challenge of dollar strength.

Our only currency overweight is the US dollar, while underweights in the euro and Japanese yen reflect commitments to monetary stimulus. We are also underweight Canadian and Australian dollars due to commodity price vulnerability.

This information is for Investment Professionals only and should not be relied upon by private investors. It must not be reproduced or circulated without prior permission. This communication is not directed at, and must not be acted upon by persons inside the United States and is otherwise only directed at persons residing in jurisdictions where the relevant funds are authorised for distribution or where no such authorisation is required. Fidelity/Fidelity Worldwide Investment means FIL Limited and its subsidiary companies. Unless otherwise stated, all views are those of Fidelity. This material was created by FIL Limited. Reference in this document to specific securities should not be interpreted as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. The research and analysis used in this documentation is gathered by Fidelity for its use as an investment manager and may have already been acted upon for its own purposes. Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and F symbol are trademarks of FIL Limited. Fidelity only offers information on products and services and does not provide investment advice based on an individual's circumstances. Past performance is not a reliable indicator of future results. Issued by FIL Investments International (FCA registered number 122170) a firm authorised and regulated by the Financial Conduct Authority, FIL (Luxembourg) S.A., authorised and supervised by the CSSF (Commission de Surveillance du Secteur Financier) and FIL Investment Switzerland AG, authorised and supervised by the Swiss Financial Market Supervisory Authority FINMA. For German wholesale clients issued by FIL Investment Services GmbH, Kastanienhöhe 1, 61476 Kronberg im Taunus. For German institutional clients issued by FIL Investments International - Niederlassung Frankfurt on behalf of FIL Pension Management, Oakhill House, 130 Tonbridge Road, Hildenborough, Tonbridge, Kent TN11 9DZ. IC15/12

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