Chris Sutton

Uncertainty over the forthcoming budget, along with the significant rise in long term gilt yields, have undermined a previously positive outlook for the UK market. Whilst the market and economy are not the same thing, expectations of higher inflation and lower growth for the UK economy are undermining sentiment. A weaker pound would be supportive of a greater skew within UK allocations toward FTSE100, despite a significant valuation opportunity in UK small and midcap. Asian equities have experienced a welcome rally in recent months, with higher expected earnings growth and lower rating than developed markets. This supports a modest increase in our MPS weighing, which currently sits just below that of MSCI ACWI. The level of speculation in areas of the US market, such as unprofitable tech, is uncomfortable, and leading to highly polarised returns. Such periods help validate our blended approach of utilising active, passive and factor-based investments. Within alternative equity, the opportunity for structured investments is the most attractive for an extended period of time, with the potential for high single digit returns from an asset class that historically has exhibited around half the risk of broader equity markets. In fixed income we continue to favour short to medium dated investment grade, whilst using strategic bond funds to add in-built flexibility to overall duration. Returns over the last year are very supportive of active over passive in the core of fixed income allocations.

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