Fixed Income
|
UK Government Bonds - conventional gilts |
|
With inflation risk and possible interest rate hikes later this year we see significant duration risk and would remain short dated. |
|
UK Corporate Bonds |
|
Given the uncertain economic outlook, we see current spreads as offering little value with little downside protection. |
|
UK Government Bonds - Index linked gilts |
|
We have a preference for the protection from inflation afforded by index linked gilts. |
Equities
|
Materials |
|
We see Chinese stimulus during 2019 as likely. Commodity markets could be a key beneficiary and rally this year. Dividend attractions also support our positive stance. |
|
Consumer Staples |
|
We like this sector for its defensive qualities, with some valuations now offering buying opportunities. |
|
Consumer Discretionary |
|
Focus on the disrupting companies and high quality brands. Structural growth and rising wages should support the sector. Note Amazon represents 15% of this sector. |
|
Financials – ex Banks, Insurance & Property |
This includes a broad range of stocks which are generally geared to investment markets, such as exchanges. Valuations now reflect the cautious lower growth outlook. |
|
|
Banks |
|
Prefer globally exposed banks to domestic, look for beneficiaries of rising rates. |
|
UK Property |
|
Some discounts in the UK are at historically wide levels however caution on Brexit uncertainty and structural trends impacting High Street. |
|
Life insurance |
|
Supportive demographics, particularly internationally, however the sector is vulnerable to set backs to investment markets. |
|
Health Care |
|
Growth and defensive attributes and global demographic tailwind. Distinguish between pharma/healthcare/biotech sub sectors. Key theme for medium term. |
|
Industrials |
|
Valuations starting to look more reasonable following the correction but watch out for value traps eg. low PE cyclicals. |
|
Energy |
|
Demand/supply dynamics should become more favourable as year progresses. Dividends sustainable with oil at current levels and valuations appear attractive |
|
Information technology |
|
Traditional tech firms - Apple, Microsoft (make up 24%) with Visa, Intel, Cisco - be selective. |
|
Communication Services |
New restructured sector - Alphabet, Facebook, Netflix, Tencent (make up 30%) included with Verizon, AT&T, Disney and Comcast - be selective. |
|
|
Utilities |
|
Valuations now reflecting political uncertainty in UK. UK interest rates unlikley to move considerably from current level. Upgraded to neutral. |
Alternatives
|
Absolute Return |
|
The sector may provide downside protection but this can come with high fees and little transparency. |
