Fidelity Multi-Asset Strategic fund manager Trevor Greetham has slashed exposure to commodities on expectations of a revival for government bonds and cash.
Greetham, also Fidelity’s director of asset allocation, has begun to realign his portfolio on expectations of a new phase for the global economy – falling inflation and below trend growth.
This new phase, labelled reflation, will see central banks cut interest rates and bring strong results for government bonds and defensive stocks, Greetham explains. However, he feels it is too soon to make any further moves from the current underweight equities position.
Greetham began stripping commodities exposure in July, moving from 5% overweight to 2% underweight relative to the fund's 10% benchmark.
The Fidelity Multi-Asset Strategic fund is up 2.2% over one year to 11 September, against a 5.3% decline for the IMA Cautious Managed sector.
“I also took industrials, resources and emerging markets underweight but I need more encouragement from macro-economic indicators that the time is right to move into consumer, property and financial stocks,” Greetham says.
“Although these tend to outperform in the reflationary stage of the economic cycle, weakness in the housing market and in the global banking system is holding me back for now.”
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