Liontrust Views Autumn 2022 - Magazine - Page 7
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BONDS
• We remain broadly negative on bonds but always maintain
some exposure as zero weighting any asset class negates the
long-term benefits of diversification.
• At present, given challenging conditions for bonds overall, we
favour higher-risk areas such as high yield and emerging market
debt, and recently increased exposure to index-linked bonds.
• Bonds continue to meet four roles: providing some income,
capital preservation, inflation protection and diversification
from equities.
CHANGES
• As part of our latest target tactical allocation review, we
pared back our exposure to Japanese equities slightly, moved
more positive on UK smaller companies and neutral on the
US, and are slightly more constructive on UK gilts and global
government bonds.
• Japan is still among our favoured cheaper equity markets and
we feel the country is well positioned amid the ongoing global
recovery. Our concern is about the country’s slow progress on
Covid vaccinations, which could impact the domestic recovery.
• We are positive about UK small companies, with predictions
that the economy will grow at the fastest rate since the Second
World War over the rest of 2021.
• We remain cautious about the US but the stock market is
offering better value after the recent cooling off. The key
question remains whether the US stock market is prone to
a deeper correction after the great acceleration of the last
year and we would suggest a shift towards ‘real world’ rather
than virtual interaction will put further pressure on technology
revenues and therefore potentially the tech mega caps.
• Finally, prospects have improved slightly for gilts and global
government bonds. While still towards the more negative end
of our tactical asset allocation scale, this reflects yields moving
upwards on the back of inflation concerns and looking slightly
more attractive.
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