Our Investment Clock model is moving into Overheat, a phase of the cycle that is often good for risk assets.
However, this is also a phase that tends to see central banks withdraw monetary support. Since the financial crisis, there has been a particularly strong link between the economic cycle and policy stimulus.
We are not bullish on the eurozone periphery or the euro. In aggregate though, global growth indicators have continued to improve and there have been some positive developments amid the gloom.
LEAD INDICATORS IN FOCUS
The inflation scorecard has turned positive and as a result, our Investment Clock model is moving into Overheat. This is a phase of the cycle that is often good for risk assets.
Our global growth scorecard continues to improve from its cycle low in September last year.
The world economy is desynchronised with the US improving as Europe bumps along the bottom.
CURRENT ASSET ALLOCATION POSITIONING
We are overweight equities, property and commodities and we retain our long term preference for the US over Europe. We remain underweight bonds and cash.
Our large underweight position in Europe offers a partial hedge against a scenario where renewed euro stress causes a premature downturn.
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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