Invesco Solutions has upgraded developed ex-US equities to neutral versus US equities in its March tactical asset allocation adjustment.
In commentary accompanying the update, head of investments at Invesco Solutions, Alessio de Longis, explained the rationale for the move.
“Shifting market dynamics are leading to downward revisions in US earnings expectations, while Europe sees upward revisions in response to an expansionary fiscal impulse and defense spending plans,” he said. “Downgrades in US earnings expectations could have important implications for global equities.”
De Longis added the firm’s framework remains in ‘a contraction regime’ with a cautious asset allocation versus benchmark and an overweighting to fixed income relative to equities.
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The team is also underweight emerging markets versus developed, overweight duration via inflation-linked bonds, and underweight credit risk. They maintained an overweight in defensive sectors with quality and low volatility characteristics.
Within fixed income, the team is underweight credit risk relative to benchmark and overweight duration via inflation-linked bonds at the expense of nominal Treasuries.
On the currency side, Invesco Solutions moved back to a neutral stance on the US dollar after a brief underweight exposure over the past month.
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“While economic data outside the US is still surprising to the upside, wider yield differentials towards the greenback lead our models to a neutral position in aggregate,” de Longis said.
The firm follows a macro process to drive tactical asset allocation decisions over a time horizon of between six months and three years, on average.
