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In a new series for Professional Adviser, each month we will bring you a snapshot of the views of Cazenove multi-manager head Marcus Brookes and co-manager Robin McDonald
| Fixed Income | View | Comments |
| High yield | POSITIVE | High yield spreads remain attractive, despite absolute yields reaching an all-time low in recent months. Financial credit still offering a degree of value. |
| Investment grade | NEUTRAL | Spreads look ‘fair value’ at this point. |
| Government bonds | NEGATIVE | Longer-term outlook remains challenged, despite the potential for some short-term rally should the ‘risk on’ trade falter from here. |
| Currencies vs £ | View | Comments |
| Yen | NEGATIVE | Co-ordinated weakening of the Yen likely to continue as Japan recovers from March’s tragic earthquake. |
| $ | POSITIVE | The dollar remains the ‘risk off’ currency and remains the unloved asset class of choice. Continues to look oversold at this level relative to sterling and the euro. |
| € | NEGATIVE | Strengthening on the back of improved domestic data, and latest EU rescue package. Sovereign issues undoubtedly remain and we expect ongoing bouts of weakness. |
| Asia currencies | POSITIVE | These remain undervalued relative to Western currencies over the longer term. |
| Equities | Views | Comments |
| UK | POSITIVE | Traditional defensive areas (such as pharmaceuticals) with strong balance sheets, good cashflows and growing dividends remain undervalued. Less positive on the industrial cyclical/basic material sectors as margin pressures increase from here. |
| Europe | NEGATIVE | Sovereign issues remain. Latest EU package does nothing but ‘kick the can down the road’. Underweight, although similar valuation discrepancies exist as in the UK with regard to the global growth/defensive areas. |
| North America | POSITIVE | Muted domestic recovery continues and valuations remain relatively supportive. Recent weak economic data (including GDP growth) may well raise the prospect of further government stimulus at some point in the future. |
| Japan | NEUTRAL | Japanese large cap valuations remain attractive although currency continues to be an issue. |
| Asia Pacific | NEUTRAL | The current policy tightening cycle could yet impact growth if it is not managed correctly. |
| Emerging Markets | NEGATIVE | As above, policy tightening reducing relative attractiveness. Strength of certain currencies (such as the Brazilian Real) may start to impact near-term competitiveness although longer-term domestic consumption story remains intact. |
| Alternatives | Views | Comment |
| Absolute: Equity | POSITIVE | Relative value trades remain attractive in a period of high actual volatility and limited market directionality. |
| Absolute: Fixed Income | POSITIVE | As above, relative value strategies offer upside in trendless markets. |
| Absolute: Macro | POSITIVE | Unconventional global monetary & fiscal policy continues to provide significant opportunity for macro managers. |
| Commercial Property | NEGATIVE | Valuations remain problematic and yields do not yet offer attractive entry point given continuing concerns. |
| Agriculture | NEUTRAL | Favourable theme but prices remain high following very weak harvests in 2010 that are not anticipated to reoccur in 2011. Furthermore, speculators remain present due to very loose US monetary policy. |
| Precious metals | POSITIVE | Gold continues to look attractive in the near term as ‘least worst currency’ and partial inflation hedge. |
| Industrial metals | NEGATIVE | Longer-term supply constraint story remains clear, but near-term valuations look stretched given monetary policy. |
|
Energy |
NEUTRAL | Longer-term supply constraint story remains clear. Despite recent volatility, near-term valuations still look somewhat stretched given monetary policy. |
The opinions expressed here represent the views of the multi-manager team at the time of preparation (29/7/11) and are not necessarily the views of Cazenove Capital. Each asset class is reported on in isolation and should not be used as a relative comparison. These views should not be interpreted as investment advice.
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| Comment | Asset Allocator's Dashboard: August 2011 |
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