Global weekly: A wave of optimism

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ABN AMRO Private Banking, Expertise, Investments,  Investment research and strategy, Research, Strategy

This week, financial markets were driven by a wave of optimism, owing to a rise in oil prices and the firm comment from ECB President Mario Draghi that “we will not hesitate to act”.

Asset allocation

The Global Investment Committee at its meeting on 18 February found that the fear of recession is exaggerated, the US Federal Reserve is expected to remain “on hold” in terms of rate hikes in 2016 and central banks worldwide are expected to continue to support growth, still having a number of fiscal and monetary policy measures left to use.

The committee therefore decided it was time to increase equity risk across the board. The increase will be at the expense of cash in cash-rich portfolios (profiles 2, 3 and 4) and, in addition, at the expense of existing exposures to hedge funds in the equity-dominated portfolios (profiles 5 and 6). Portfolio profile 1 remains unchanged.

The asset allocation now calls for an even stronger overweight in equities, and unchanged positions in bonds (underweight), commodities (overweight) and an underweight allocation to real estate in balanced profiles. The allocation to hedge funds remains an overweight, with the exception of the equitydominated portfolios with a neutral allocation.

For portfolio profile 3, the 5%-increase in equity risk comprises an increase of 3% to return to the tactical asset allocation of 38% of early December and an additional 2% increase in equity risk. As a result, the tactical equity allocation has increased to 40%.