November was a dramatic month in the world of politics, which had an effect on markets. The election of Donald Trump as the 45th US president, like the Brexit vote, proved the pollsters wrong and led to a sharp rotation in global markets. While there is still a great deal of uncertainty surrounding whether President-elect Trump will be willing (and able) to deliver some of his campaign pledges, talk of a fiscal boost to economic growth through infrastructure spending and tax cuts dominated market sentiment for much of November.
Our view – asset allocation summary
- At its November meeting the Asset Allocation Committee decided to reduce exposure to US Treasuries in the centralised models, with an increase in the allocation of absolute return and short-dated investment grade credit
- Our overall asset allocation strategy remains in place and there has been no significant change to the house view – Central banks are now clearly approaching their limit in terms of their ability to stimulate markets, imperilling valuations, and while fiscal policy may provide some boost to global economies and inflation, it may not help asset prices
- Following the US presidential elections, an accelerated fiscal stimulus package is now expected, which is likely to put pressure on US Treasuries. As a result, we have taken profits from US Treasuries and looked to redistribute the proceeds into areas which match our house view of caution and mitigate downside risks
- Following fresh falls in sterling and under-appreciated risks to the euro, we are also now seeking to hedge out euro currency exposure
I hope you have found this update helpful. Please do get in touch if you have any queries or would like more information.
This article was previously published on Tilney prior to the launch of Evelyn Partners.