Data key as wealth managers gear up for volatile summer
By International Adviser, 1 Apr 16
Like Janet Yellen’s Federal Reserve, it would appear that UK wealth managers are planning to be very data dependent in the second quarter.
It’s tricky to pre-empt shifts in allocation as we’re very fluid and open to change subject to economic data and valuations. We’re very accepting at present of allowing more risk into the range when we get shifts down in valuations, particularly so in Asia and emerging markets where, on a five year view, we’re being presented with a wonderful opportunity. Yields in Asia are bountiful, and arguably they are as attractive there than anywhere else at present, which is enticing. However, the QE-led recovery has perhaps distorted ones expectations of any ‘reversion to the mean’ so we must be mindful that an emerging markets recovery is unlikely to be textbook.
Many data points are worth observing – but at present they appear to count for little. FED rhetoric and subsequently the strength of the US dollar dominates. This won’t last forever, but while it does, it would be folly to pay too much attention to more traditional touch points of economic health – inflation, GDP, employment, account deficits and so on. It’s a time to focus more on bottom-up valuations and the robustness of themes and sectors, rather than traditional macroeconomic indicators. While many global uncertainties remain, the price one pays for a stock remains the surest way to mitigate the headwinds and generate a positive return.