As part of our focus on providing a high quality, personalised investment service, our Investment Office look to support our investment managers in their decision making when it comes to constructing client portfolios.
Our asset allocation committee is one example of this, via their monthly output showcasing their views on a global basis; this is then complemented by a sectoral view from the stock selection committee. The combination of these top down and bottom up opinions is an important resource for our investment managers to validate their own investment theses or to generate new investment ideas.
These committees, which consist of members of our research team and a number of investment managers, aim to provide a view that seems most suitable in the current climate. The output of the monthly meetings remains a suggested stance and it is important to note, that the views expressed are those of the committees and may not necessarily be those of your individual investment manager.
Here we present a snapshot of the current views.
SECTOR FOCUS
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Communications |
The communications sector is concentrated around a few large US companies, including Alphabet and Meta. The sector is driven by advertising spending, which has continued to be resilient. Performance of Alphabet and Meta has been dominated by their perceived exposure to AI, balancing this against the very large capital expenditure outlays they have announced. Whilst AI remains a clear tailwind in the sector, valuations are stretched and so we remain underweight. |
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Consumer Discretionary |
The sector benefits from a still-tight labour market and resilient demand, particularly across travel and experience-led spending. That said, consumer budgets are becoming more stretched, and confidence remains mixed in key markets, with trade tensions and tariff risks an ongoing headwind. Structural drivers include continued growth in e-commerce and digital monetisation. We maintain an overweight position, while remaining selective, given the sector’s sensitivity to the economic cycle. |
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Consumer Staples |
Moderating inflation is alleviating supply chain and input cost pressure on consumer staples businesses, making for a more stable operating outlook. However lower inflation will likely reduce the contribution from price to revenue growth, increasing the importance of volume contributions in the future. We appreciate the defensive nature of consumer staples businesses in the current environment, but focus on companies with strong brands and innovation track records, with exposure to underlying category growth. |
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Energy |
Brent crude oil has performed well year to date, supported by disciplined supply management and renewed military conflict in the Middle East. Consequently, oil company performance has remained resilient, further augmented by strong cash generation and capital discipline. Looking ahead, risks for oil prices appear broadly balanced and we expect the majors to prioritise a pragmatic approach to the energy transition. We retain a neutral stance. |
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Financials - Banks |
Bank performance is quite strong, continuing a trend seen for a couple of years. For banks with an investment banking arm, the capital markets exposure continued to be favourable with generally buoyant markets providing a tailwind for bank trading books. Elsewhere, performance continued to be solid with retail banking margins supported. Valuations in the sector are elevated following solid share price performance and with some interest rate cuts still to come through we remain neutral rated. |
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| Health Care |
Results in the sector are solid and the resilient demand profile of the sector is attractive. With most pharmaceutical businesses having negotiated deals with the US administration, investors were able to refocus on individual business performance and the sector was less driven by headlines. Looking forward, health care is expected to remain resilient. Share price rises have led to increasing valuations, but the resilience of the sector is still attractive. |
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| Industrials |
Industrials are concentrated largely in areas linked to electrification, automation and data centre related investment. Outside of these pockets, activity has been constrained by still-subdued global industrial production, reflecting softer demand and cautious customer spending. Easing inflation and the prospect of lower rates should be supportive, however order visibility remains uneven and valuations for AI-exposed names continue to look rich relative to fundamentals. |
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| Information Technology |
Tech performance was mixed, as AI dominates sentiment in the sector. New spending announcements from big tech companies received a varied reception. Increasing scrutiny is being put on the returns these businesses could achieve. Elsewhere, AI pressured software names where there is a perceived disruption risk. We do not expect there to be much more clarity here in the coming months, however the valuation of many names in the sector provides limited margin of safety – and so we remain underweight. |
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| Materials |
The materials sector has continued to be strong. Copper rests near all-time highs and rallied strongly in 2025. Precious metals have been a key focus in early 2026, following a very strong year in 2025. Silver kicked off the year with a strong rally and has since seen very large bouts of volatility. Gold has similarly been very volatile but remains near all-time highs. Much of the sector’s large iron ore exposure is to China and so the outlook here remains important. We remain constructive on the long-term outlook for copper. |
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| Real Estate |
Real estate markets are recovering, with demand remaining solid across commercial property and logistics. The sector remains sensitive to interest rates given the impact on valuations and high levels of debt financing. As we look ahead to the rest of 2026, there are grounds for cautious optimism, supported by a modest recovery in housing activity, ongoing rental growth and continued resilience in logistics and the broader residential investment market. We remain neutral. |
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| Utilities |
Utility performance is underpinned by the relative stability and defensiveness of utility company cash flows in increasingly volatile market conditions, as demonstrated by appreciating valuations. Balance sheet condition, regulatory outlook, and growth opportunity arising from power infrastructure demand continue to drive our preference for power over water whilst remaining neutral on the sector as a whole. |
ASSET ALLOCATION
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UK |
The UK economy shows clearer signs of slowing. Inflation and wage pressures remain uncomfortable for policymakers, even as the labour market softens. The substantial fiscal consolidation required is likely to restrain both growth and prices, strengthening the case for deeper interest rate cuts. UK equities remain attractively valued, yet domestic investors continue to favour overseas opportunities. With the market still dominated by financials, energy and staples – sectors that struggle to offer compelling long-term growth, we maintain a neutral stance. |
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North America |
The American economy enters 2026 with steady growth, though inflation remains stubbornly above target. While the labour market is softening, expectations of policy easing continue to buoy sentiment. Equity markets benefit from this mix of resilience and central bank flexibility. However, wide fiscal and current account deficits point to a weaker dollar. Persistent risks around long-term yields also cast a shadow – particularly for mega cap technology names. Prospects for absolute returns remain reasonable, but valuations and currency headwinds mean we remain underweight. |
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Europe |
Europe has shown unexpected resilience despite structural drags such as demographics and low productivity. Growth in 2026 should be helped by steadier global demand and easier financial conditions. With inflation near target, policymakers retain scope to ease further if needed. Rising defence and industrial investment promises additional momentum. Political and trade risks remain, but a gradual shift toward deeper fiscal coordination offers longer-term promise. The region’s improving policy mix supports an overweight allocation. |
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Japan |
Japan’s policy shift away from negative interest rates has helped consolidate its move out of longstanding deflation. Corporate governance reforms are gathering pace, encouraging better capital discipline and improving returns to shareholders. Although economic growth remains modest, a more assertive corporate culture and ongoing buybacks support the case for higher valuations. Political risks persist, but recent leadership changes point toward a pro-market tilt. These dynamics justify maintaining an overweight position. |
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Asia Pacific |
The Asia Pacific region remains central to global growth, set to generate more than half of worldwide expansion in 2026. Markets stand to benefit from an upswing in technology and semiconductor cycles, while supply chain diversification continues to draw investment into ASEAN economies. Corporate reforms aimed at boosting shareholder returns are advancing, and valuations remain appealing relative to developed markets. A softer US dollar further enables accommodative regional monetary policy. These factors support continued overweight exposure. |
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Emerging Markets |
Conditions across emerging markets remain uneven. Commodity-linked economies may benefit from global shortages, while others face inflationary and political pressures. Valuations are attractive, especially in sectors tied to consumption and resources, though volatility and currency risks remain a persistent concern. A weaker dollar would offer support, but uncertainty around future US trade policy limits conviction. On balance, a neutral allocation remains appropriate. |
