The multi-asset team at Baring Asset Management confirms moving progressively to more defensive asset classes such as cash and developed government bonds in their multi-asset portfolios.
This repositioning is in response to ongoing euro woes now that there is little sign of a resolution to the Greek sovereign debt crisis before the next election. “We hadn’t been expecting much from Europe but even our expectations relative to the consensus seem overly optimistic as the strains on the European financial system grow, particularly in places like Spain,” confirms Percival Stanion, Barings’ Head of Asset Allocation and Chairman of the Strategic Policy Group.
In light of this view, Barings’ multi-asset team says it has maintained its support for the US dollar and adopted a more cautious approach to equities, particularly to economically-sensitive areas such as Materials and Industrials, whilst concurrently upgrading defensive sectors such as Healthcare.
“We continue to favour the US where growth is still looking strongly underpinned, although public sector spending cuts could threaten output in 2013. In currencies, we maintain our preference for the US dollar over the euro.”
On Asia, Barings has taken the view that Japan’s continued growth is encouraging following the rebuilding programme on the back of last year’s earthquake and nuclear incident. However, China continues to disappoint Barings and the recent weakness in Asia’s largest economy has brought significant downward pressure on industrial commodity prices, including oil. More optimistic investors are still expecting an aggressive government stimulus programme and there have been more encouraging comments about accelerating infrastructure spending. But Barings thinks this might be too little, too late.
“Markets increasingly look to policy makers around the globe for leadership and policy clarity. In an environment where clarity is in short supply, it is likely that markets will remain volatile and risk premia elevated,” concludes Stanion.
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