Investment Strategy: Taking profits and raising cash for the future

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After an 11% run-up in global equity markets over the last three months, ABN AMRO suggests that clients consider taking some profits in their stock portfolios. The ABN AMRO Investment Committee also suggests selling commodity positions and shifting positions in European high-yield bonds to US high-yield bonds.

Time to take some profits in equities

After recommending to increase equity positions in mid-October before the US Presidential elections, and suggesting a further increase in mid-November after the elections, ABN AMRO suggests that clients take some profits after the market’s rise over the past few months and add the proceeds to their cash positions.

Stock market performance has been positive since the US election of Donald Trump, driven by an expected increase in US fiscal spending, solid macroeconomic momentum and a slightly better-than-expected earnings season. Valuations are also reasonable. In this environment, equity market fundamentals and important indicators, such as earnings and valuations, continue to be solid and supportive of stock investments. Nonetheless, politics can be a source of risk. It is therefore suggested that clients heavily invested in stocks consider paring back these positions.

When reducing stock portfolios, ABN AMRO suggests cutting positions in interest-rate sensitive parts of the market, such as stocks in the telecoms, consumer staples and utility sectors, while retaining a balanced regional approach that includes US, European and emerging-markets stocks.

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