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The Big Picture: Global Asset Allocation 2021 Q4
22 September 2021
Despite another good three months for cyclical assets, we are sticking with them within our Model Asset Allocation. We make minimal changes, with a reduction in the allocation to highyield credit (to Underweight) and a corresponding increase to equities (going further Overweight). Real Estate and equities remain our favoured cyclical assets, while cash is our diversifier of choice. We boost allocations to emerging market (EM), Japanese and UK assets, with an overall preference for UK and EM assets.
Model asset allocation
In our view:
- Equities offer good returns as the global economy recovers. We go further Overweight.
- Real estate (REITS) has the potential to produce the best returns. We stay at Maximum.
- Corporate high-yield (HY) is now less attractive. We reduce to Underweight.
- Corporate investment-grade (IG) now holds no advantage over cash. We stay at zero.
- Government debt outlook is poor. We remain Underweight.
- Cash returns are low but stable and de-correlated (it is our diversifier of choice). We stay at Maximum.
- Commodities are supported by the cycle but some are expensive. We remain Underweight.
- Gold is threatened by rising yields and a stronger USD. We remain at zero.
- Regionally, we favour the UK and EM (and are Underweight US assets)
Our best-in-class assets (based on 12m projected returns)
- UK equities
- EM real estate
- EM government
- USD cash
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Data as of 31 May 2021 unless stated otherwise.
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