The Allocation Brief

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Topic

Equities

A collection of 6 issues

Market conditions

Valuations alone do not make or break a market. By weighing prices, momentum, leverage, sentiment and the economic outlook, the evidence points to caution without turning fully defensive. The downside grows far steeper if earnings and valuations both weaken.

Risk of recession

From the dotcom bust to the banking crash and the pandemic panic, each major equity market sell-off has had its own spark. That makes risk hard to map with neat labels.

Market conditions

Gilt yields have surged at a breakneck pace, yet the case to shift stance remains weak(ish). Equities have slipped but not enough to offer clear value. With risk signals muted and oil the key swing factor, holding near neutral still looks like the smart move.

Market movements

We are a week into a major conflict in the Middle East and an associated near-sudden stop in oil and gas tanker traffic through the Strait of Hormuz. This week’s note reviews the impact so far on capital markets and commodity markets and sets out how, as an asset allocator, I am responding.

Inflation outlook

In last month’s inflation update, I set out my expectations for inflation to move from 3.37% in December to 2.93% in January. In the event, the year-on-year increase in headline CPI came in at 3.01%. That is close enough for my purposes.

Equity markets

As an asset allocator, there are all sorts of questions to which I would like clear answers, but for which data are either unavailable, published too infrequently (and often with a long lag), or simply too expensive to obtain.