Liontrust’s head of multi-asset John Husselbee remains bullish on equities, and pro-risk on a tactical basis.
In his latest commentary note, Husselbee outlined his team’s current asset allocation views in both a tactical and strategic terms.
“We believe there are many opportunities in global financial markets today,” he said. “Our degree of positivity is reflected in the current tactical asset allocation score of four out of five, on a scale of one to five in which the latter is the most bullish.”
See also: Sector in review: IA Commodities and Natural Resources
“While we are pro-risk on a tactical, 12 to 18-month basis versus our underlying strategic asset allocation, we believe there is still scope for more optimism.”
The Liontrust team is positive about nine of the 22 asset types assesed, with most of the remainder scoring a neutral three. At present, the decision is more about where the team decide not to invest rather than where it does, Husselbee explained.
“The rallies in equity markets over the past few months have pointed to growing confidence,” he said. “It has also been encouraging that the US rally has broadened beyond the magnificent seven stocks that have dominated the market for so long.”
The once-feared hard economic landing is looking less likely, as seen in the strong data emerging from the US, he added.
See also: How much longer will gilt and treasury yields remain in lockstep?
Liontrust is biased towards being overweight in equities, especially in the UK, Japan, Asia ex-Japan and emerging markets.
“The economic environment and outlook are positive for equities,” Husselbee said. “They are still generally cheap, under-owned and there is a lot of cash waiting on the sidelines. A strengthening global economy or further improvements in investor sentiment would give a major boost to them.”
As ever, the market carries risk despite the overall positive outlook. “Even with the equity gains in the first quarter, the second successive quarter of positive returns, there was always a risk that the significant rallies could trigger a pullback,” he added.
See also: PIMCO: Multi asset investors should expect regional divergence
“This release of pressure materialised in mid-April, when some markets, including the US, dipped. Given our optimism highlighted earlier, we regard such pullbacks as opportunities to add to tactical allocations. Indeed, the UK stockmarket has subsequently breached its all-time high.”
“Buying stocks at the wrong price is a risk, but this is always the case, even at the best of times,” Husselbee continued. “In our view, most major stockmarkets look fairly priced, if not quite cheap in several cases. The exception is the US, which looks expensive on many measures, although outside the magnificent seven mega caps, there is value available.”
