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Trevor Greetham's Investment Clock Aug-Sep: Developed world revival
Mixed signals over the summer have evolved into a re-acceleration in global growth led by developed economies where monetary policy remains ultra-loose. This has pushed the Investment Clock towards the ‘Overheat’ phase of the economic cycle characterised historically by central bank tightening. This is bad news for bonds though a lack of actual tightening should keep stocks on a positive trend.
Talk of US Fed tapering sometimes obscures the fact that US monetary policy is set to remain loose for at least a year, the housing market is on a clear recovery path and fiscal drag is fading. Recent policy easing is also taking effect in Japan and the UK. Even Europe’s economies have moved out of recession. With fiscal and monetary tightening off the agenda for the time being, this phase of strength could last into 2014.
Note: The red dot marks the current position of the investment clock.
LEAD INDICATORS IN FOCUS
Growth
- The global growth outlook has improved markedly in the last few months, posting its strongest reading since 2009.
- We put the extension of the upswing down to improvements in developed economies.
Inflation
- Our inflation scorecard is less negative, however, there is no sign as yet of a meaningful pick-up in inflation – a lot will depend on the direction of commodity prices.
- The longer excess capacity and slower Chinese growth can keep prices down, the longer this growth upswing is likely to last.
CURRENT ASSET ALLOCATION POSITIONING
- We added to equities and commodities this month to take risk assets back overweight from the neutral position held since June.
- We are overweight stocks and cash with underweight positions in commodities and bonds.
- With growth broadening out, we trimmed overweights in US and Japanese equities to shrink underweights in Europe and Asia Pacific.
- We moved underweight government bonds in October 2012 and see further downside as markets remain focused on the end to Fed QE.
Trevor Greetham joined Fidelity in January 2006. He is Director of Asset Allocation and in addition to managing funds, Trevor is a member of Fidelity’s Asset Allocation Group. Prior to joining Fidelity, he spent ten years at Merrill Lynch, where he was Director of Asset Allocation. Trevor began his career with UK life insurer Provident Mutual. He holds an MA in Mathematics from Cambridge University and is a qualified actuary.
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Ämnen
- Finans
Kategorier
- developed world
- developed world revival
- trevor greetham
- investment clock
- fidelity worldwide investment
- fidelity international
- fidelity
