A just-published report updated our multi-asset recommendations. Anxiety about the global growth outlook will persist in the near run, but the most likely outcome on a 6-12 month horizon is that the economic expansion will be sustained. Thus, portfolio returns should soon improve, initially reflecting more stable bond returns and, ultimately, better equity returns.
Nevertheless, we continue to overweight cash in a multi-asset portfolio, as inflation is likely to stay elevated relative to central banks’ targets. The underlying bear market in government bond markets will eventually resume if the global economic expansion continues, as we expect. Tactical considerations aside, we remain underweight bonds in a multi-asset portfolio on a 6-12 month horizon.
For stocks, a lot of bad news is already discounted and we recommend a neutral exposure within a multi-asset portfolio. Within equities, we favor the U.K., Switzerland, China and the euro area, with a neutral stance on the U.S. and Canada, and underweights in Australia, Japan and Sweden.