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WM Quarterly Outlook: how leading investors are positioned for 2013
by David Campbell on Jan 16, 2013 at 00:01
The global economy saw out the final few hours of 2012 on a cliff-hanger as the world waited on some form of legislative fudge allowing the US to dodge its fiscal cliff. And a legislative fudge was what was duly delivered by Congress in the wee small hours of 1 January 2013.
The expiring session of Congress was the least productive since the 1940s, which tells you much of what you need to know about the stuttering US recovery of the last four years.
If we can derive comfort from the fiscal cliff deal, it marked the abandonment of the Hastert rule, the Republican resolution that dictated that party leaders would only allow legislation to reach a vote with ‘majority of the majority’ support: one of the biggest factors in government gridlock.
For all the sturm und drang, the fourth quarter of 2012 echoed a familiar pattern of recent years for discretionaries. After the radical reappraisal of risk appetite in Q3 on European Central Bank and Federal Reserve commitments of support for markets, Q4 saw far more limited changes to asset allocation as investors settled in.
‘This year is likely to be more of the same,’ James Calder, head of research at City Asset Management, told Wealth Manager’s Quarterly Survey, conducted over the Christmas period.
‘Investors are beginning to realise we have entered a new environment of lower growth and therefore expectations need to be tempered. The usual macro issues of Europe and other sovereigns/governments continuing to make a hash of policy [will drive returns],’ he added.
Booking US profits
Through the final quarter, investors did prudently book some profits on US equity, with overweight allocations falling 48.1% to 36.7%.
For the record, that was still a smaller margin of quarterly change than Q1 when investors piled in, and is only the fourth biggest quarter-on-quarter shift in US equity over the 21 months Wealth Manager has been surveying readers on asset allocation, so it hardly indicates panic stations.
More dramatic was the shift into European equity which was extended from Q3. The increase in overweight allocations from 25.9% to 46.7% over the three months lifted it from a 12-month low of 14.8% in Q2.
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As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.
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