The US will continue to be Schroders' market of choice in 2009 as it could be one of the first to emerge from the current economic crisis, according to chief economist Keith Wade.
He believes the US could come out in front partly as a result of the determination of the Fed to improve the monetary environment by aggressively cutting interest rates and introducing various measures to improve liquidity in the markets.
However, Wade remains neutral on UK equities, saying the recent weakness in sterling and the likelihood of further interest rate cuts should provide some support to the deteriorating economy.
He also expresses his concerns about global emerging markets saying they remain susceptible to further weakness in the global economy as well as falling commodity prices. Wade believes sentiment towards the regions has also soured in recent months, and continues to remain underweight.
However, he is more optimistic about emerging Asia, where economies have stronger balance sheets, are more broad-based and less exposed to commodity production.
On Japan, Wade remains netural as despite the country not having the same structural problems as the rest of the developed world, it is still heavily exposed to the global economy.
"Prospective earnings continue to be downgraded, but the extent of the revisions is not as large compared to other markets," he says.
Meanwhile, Wade remains positive on bonds, with a preference for investment grade, high yield and inflation-linked over conventional government bonds.
"Government bonds have continued to rally over the past month on global recessionary fears, but they appear uncompelling on valuation grounds," he says.
"On the other hand, investment grade and high yield valuations are looking attractive given that spreads are at historically wide levels."
He adds he has turned positive on index-linked bonds, which have been oversold on deflation fears, and now offer attractive real returns.
Wade insists his cautious stance on commercial property, hedge funds and private equity remains in place as has his negative position on commodities.
In contrast, he is positive on infrastructure as he believes governments across the world are likely to increase their infrastructure spending in order to prop up faltering growth next year.
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