Fidelity's Trevor Greetham has boosted commodities exposure in his Multi Asset Strategic fund after the manager's investment clock model moved to the ‘overheat' phase for the first time since 2007.
Greetham has also gone underweight in government bonds, expecting the global economy to experience a period of sharp growth and rising inflation.
Using his quantitative investment clock model, which determines the state of the global economy, the manager alters his asset allocation between equities, bonds, commodities, property securities and cash.
"My global growth scorecard lead indicator is at its strongest level since the V-shaped recovery of 2003-2004," Greetham says.
"Central banks are operating ultra-loose policy, the OECD lead indicators have troughed, business confidence is rising and economists are upgrading their GDP forecasts.
"The global inflation scorecard has also turned positive for the first time since September 2008 on the back of rising energy prices and upgrades to CPI forecasts."
While strong global growth and an upturn in headline inflation are the key signs of this new cycle, the manager says it is "no ordinary overheat".
"Headline inflation rates in most countries are starting off negative, there is massive spare capacity in the world economy and the financial system remains fragile," Greetham says.
"Central banks have had a near-death experience and will be in no hurry to deliver the rate hikes needed to move to a restrictive monetary policy.
"However, they will come under increasing pressure to start their exit strategy from quantitative easing as we head towards year end and this is likely to be negative for bonds."
With global growth picking up, Greetham will continue to hold overweight positions in equities and property, with a preference for the emerging markets and Asia.
"I have reduced my overweight in the consumer sector as discretionary stocks are interest rate sensitive and staples are at risk from rising raw material costs," he adds.
"I have instead added a little more to commodities. I remain overweight financials, technology and the consumer sectors."
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