The economic upswing that began in the summer of 2012 has lasted more than a year and there’s a very good chance it lasts well into 2014. Inflation pressures are muted and no major central bank is likely to tighten policy for at least six months. Once the US fiscal standoff comes to an end, investors will focus on the positive outlook for stocks. Looser than expected Fed policy and better news out of China has also set the scene for a tactical rally in commodities and the emerging markets.
LEAD INDICATORS IN FOCUS
- Our global growth scorecard has moved to its highest level since 2009 on the back of improvements in business confidence and upgrades to economic growth forecasts.
- Inflation pressures are muted and no major central bank is likely to tighten policy for at least six months.
- We think the Fed under Janet Yellen’s leadership will need to see signs of inflation before moving to a significantly tighter policy stance.
CURRENT ASSET ALLOCATION POSITIONING
- We have been overweight equities for a year and moved back to a large overweight during the August weakness: Fed QE is positive, valuations are fair and markets will focus on strong global growth once the US fiscal stand-off ends.
- We moved commodities up to neutral: excess capacity and dollar strength will be structural headwinds but stabilisation in China, continued Fed QE and a near-term bout of dollar weakness could provide a boost.
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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