Skandia Investment Group (SIG) has upgraded its equity exposure from neutral to overweight in anticipation of continued strong corporate profits.
SIG, which has been neutral on equities since June, said although recent economic data has been soft, companies have continued to generate solid profit growth and it expects this trend to continue.
Equities are also very cheap relative to bonds and cash, it added.
SIG continues to favour emerging markets over developed markets, expecting emerging economies to outperform in line with falling inflation in the region.
For September, it is "very positive" on the emerging Asia equity region and "positive" on the emerging EMEA, Latam and Japan equity region.
It added whilst most emerging economies are growing in step with government targets, developed economies are struggling to generate sufficient growth to reduce deficits and unemployment rates.
SIG remains "very negative" on the US equity region, although it expects the US and Europe to avoid recession.
"The sharp falls in many equity markets have left them very cheap relative to cash and bonds and we think this will over time encourage portfolio shifts into equities," said SIG chief investment officer James Millard.
"In addition, we think the likelihood of a new recession is low and we expect very low interest rates to offset some of the headwinds facing markets and economies. With government yields close to the lowest on record, we remain underweight bonds."
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