Asset allocation view
By
👤Fidelity
Also Interesting
The broad-based risk rally that started after Christmas has not yet subsided, with this positive surprise for investors largely driven by the Federal Reserve signalling a slower pace of monetary tightening, and by positive signs on the trade talks between the US and China. But does this paint the whole picture, and imply last year’s fourth quarter selloff was overdone?
If the market was fully convinced of a return to risk, then traditionally defensive assets like US Treasuries and gold would certainly have faltered by now. Instead, they have continued to perform, leading us to believe that market participants remain open to the possibility of global growth stalling, and safe-haven assets becoming more attractive from here. Our Fidelity Leading Indicator supports this view and is presenting a negative outlook for global growth.
But on the other hand, there are still pockets of value to be found globally. One example is in emerging markets, which are presenting opportunities across the capital structure. Driving this are attractive valuations after a weak 2018, a US dollar unlikely to appreciate further, the dovish turn by the Fed depressing real rates, and despite oil rallying significantly so far in 2019, it is still down from its multi-year peaks in 2018. This month, we have further added to emerging markets by moving overweight hard currency debt. But maintaining selectivity is important, and we don’t simply buy the relevant indices when it comes to emerging markets, but instead leverage our dedicated Manager Research team to find the most skilled active managers in what is a heterogenous market.
By
👤Fidelity
