Trevor Greetham, head of Tactical Asset Allocation and portfolio manager, and Hiten Savani,investment director Institutional Business, say in Fidelity's latest Investment Clock report that things are looking up for stockpickers.
Trevor Greetham, head of Tactical Asset
Allocation and portfolio manager, and Hiten Savani,investment director Institutional Business, say in Fidelity’s latest Investment Clock report that things are looking up for stockpickers.
Investment Clock Recovery Good for Stocks
Our global growth scorecard turned positive in December for the first time since June 2012 but the good news is inflation pressures remain muted. The Investment Clock model that guides our asset allocation decisions is in the equity-friendly Recovery phase, following the theoretical “Clockwise” path for the first time since the financial crisis. G7 monetary policy is loose and a sea change in central bank attitudes means policy is likely to stay that way even if inflation pressures start to build.
Synchronised Global Recovery
Slower inventory accumulation hurt US GDP growth late last year but consumer spending remains solid. Activity in China is also picking up with the HSBC PMI at its highest level in two years. There are early signs of recovery in Japan where policy is set to ease on all fronts in an attempt to follow the US path out of debt deflation. The Euro Area economy contracted in 2012 Q4 but even here growth looks set to surprise a pessimistic consensus if the pace of money supply growth is anything to go by.
Overweight Stocks and Commodities
A synchronised global recovery should be good for commodities. Investor sentiment is very bullish, leaving stocks vulnerable to negative shocks. However, with economic data improving and monetary policy loose, we see the risk reward skewed to the upside. Within equities our strongest conviction is an overweight in the emerging markets and an underweight in Europe. We raised Japan to neutral in recent weeks but maintained our short position in the yen. We are maximum underweight bonds.
Click here to read the full report: [asset_library_tag 6396,ClockWise February]