Trevor Greethams ClockWise October: Benefiting from disinflationary shocks

Benefiting from disinflationary shocks

We are in a two-speed world economy with the US in much better shape than the rest. Regional divergence has found expression in a bout of dollar strength, commodity price weakness and a sharp correction in equity markets.

We took advantage of market weakness and depressed investor sentiment to raise our equities allocation. US growth remains strong and the drop in gasoline prices will only strengthen the consumer.

Lead indicators in focus

Growth

The growth outlook remains positive but the recovery has become patchy and unbalanced. US growth remains robust and unemployment continues to fall.

Outside the US, activity in the Euro area is weak, China continues to slow, and Japan is still suffering the after-effects of a sales-tax hike.

Inflation

Our global inflation scorecard continues to point down with inflation low or falling and inflationary pressures absent.

Non-US economic growth weakness, excess capacity and increases in energy supply continue to push commodity prices lower.

Current Asset Allocation positioning

We raised allocation to equities again this month to take advantage of depressed sentiment and market volatility amid sustained economy recovery.

A combination of slower growth in China, dollar strength and excess capacity keeps us underweight commodities.

We are moderately underweight government bonds on the expectation of poorer returns as central banks normalise policy, while a lack of inflation means rate hikes are not imminent.

Trevor Greetham, Director, Asset Allocation, Fidelity Solutions

Trevor Greetham joined Fidelity in January 2006. In addition to managing multi-asset funds, he is Director of Asset Allocation within Fidelity Solutions. He holds an MA in Mathematics from Cambridge University and is a qualified actuary.

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