After the recent correction and with the breadth of our asset allocation research still favoring equities, we are rebuilding an equity overweight, primarily using U.S. large-cap stocks. While the Fed heads toward the exit, the European Central Bank is planning to provide further monetary easing and the Bank of Japan is continuing to expand its
Recent market performance, particularly in September, has been negative across a widespread array of asset classes as we have seen the U.S. dollar exchange rate rise with increasing intensity in recent months. The worst returns, not coincidentally, were delivered by the very assets that have shown historically high sensitivity to dollar strength. This disruption to
We have advocated an overweight to equities for several years. Even through the early year setbacks for the global economy and for global stocks, our views favored equities over other investment choices. To the degree that our overall investment stance has been overweight equities, we have willfully assumed a higher risk profile than usual. So
Surprisingly solid returns for bonds in the first half could lead to disappointment in the second half of the year. We continue to believe high-yield bonds are worth holding, especially higher quality ones. Improved country fundamentals and strong technical support favor EM bonds but caution that returns could be less stable in the near term.
While most equity markets had positive first half performance, we still expect modest acceleration in growth ahead for the global economy. From both a valuation perspective and investor sentiment viewpoint, Chinese, Russian and Japanese equities look cheap. Europe appears vulnerable to shifting sentiment in addition to further downward revisions to profit expectations. In our latest
No changes from last month. Source: Columbia Management Investment Advisers, LLC. The chart reflects the views of the Global Asset Allocation Team as of July 24, 2014. Asset classes are ranked from 1 (overweight) to 5 (underweight), with 3 representing a neutral allocation.
In contrast to last year, so far this year all major asset classes have performed well. Developed market equities, bonds, emerging market (EM) equities and EM bonds, and commodities are all up year to date in the range of 4%-8%. Globally diversified portfolios should continue to fare well in this environment and the global asset