“This is not to say there isn’t any downside risk, but we see two developments as particularly interesting when combined with this stabilisation.
“The first one is the support from central banks, the US Federal Reserve but also the European Central Bank. We know looser financial conditions typically lead to stronger economic momentum. The second element is a potential pause in the trade conflict between China and the US. When you look at recent business surveys, pretty much anywhere in the world, tariffs and trade war always stand out as the biggest risks companies are facing.
“A pause in the trade war, coupled with support from central banks, could be decisive in turning stabilisation into an actual pick-up and more positive economic momentum going forward.”
On our portfolios and funds…
Monique Wong: “We don’t position our portfolios for binary events. We haven’t run out and put on a position to trade the Christmas election. What we do is identify opportunities where these events cause stress or dislocation. Here, the Brexit journey has provided us with a couple. One, sterling valuations are cheap on a long-term view and our UK portfolios are carrying around a 10% higher sterling weight than at the time of the referendum.
“We also have a tilt within our UK equity allocations to mid-cap and domestic stocks, which have enjoyed a good, higher earnings growth profile, especially mid-cap stocks.
“If I take a step back from the UK, our portfolios are diversified internationally by region. At the top level, we are a bit more positive on equities than we were three months ago, and have increased our equity allocation. However, we are not overly tilted toward risk assets.
“As we don’t see an imminent recession, it’s worth remembering that the big years in stock markets tend to occur in the run-up to a recession, and the period coming out of one."