Trevor Greetham´s Investment Clock December 2011: As defensively positioned as 2008

LEAD INDICATORS IN FOCUS

Inflation

• The inflation scorecard remains in negative territory.
• Headline inflation appears to be peaking. If this trend is sustained, fear of deflation will once more become the prime concern in the developed, debt-ridden economies.

Growth

• The global growth scorecard remains in negative territory and suggests further weakness ahead.
• Global growth is slowing, leading indicators of activity are weak, business confidence is falling and economists are downgrading their GDP forecasts.

CURRENT ASSET ALLOCATION POSITIONING

• In August, we moved underweight stocks and commodities and increased bonds to a large overweight. More recently, the cash position was increased and the real estate position reduced in the light of heightened levels of market volatility.

Within equity markets, we favour the US; the market has relatively defensive attributes and, despite the fiscal deadlock, it is still the most likely to stimulate its economy to protect economic growth and jobs. Swiss equities are also attractive for their defensive qualities. Within sectors, we prefer defensive areas such as healthcare and consumer stocks at the expense of cyclical areas like materials and industrials.

Trevor Greetham joined Fidelity in January 2006 as Asset Allocation Director. 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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