Speaking on behalf of the Skandia Global Asset Allocation Committee, SIG Chief Investment Officer James Millard said:
As the third quarter ends, it is clear that the global recession is largely over. Data in the next few weeks should show that most economies grew in the third quarter, although year-on-year rates remain negative in many places. The recovery is being driven by the manufacturing sector, although recent data has also showed signs of a recovery in housing and other markets.
Looking forward, we expect recent trends to continue, although the pace of the equity and credit market rally may start to slow over the next few months. We remain heavily overweight equities and non-government bonds. Within equity markets we continue to prefer emerging over developed markets and have not made any changes to our positions. Within our cautious portfolio we have reduced the size of our overweight exposure to bonds following the rally seen over the last few months.
There were few significant deviations in sector performance in September, says James Millard. The more cyclical sectors, such as materials and energy performed the best, while less cyclical sectors such as utilities and healthcare performed poorly.
Looking forward, we have made no changes to our sector preferences. We continue to prefer the cyclical versus non cyclical sectors. In addition, we continue to like financials where the economic recovery, ongoing monetary support and attractive valuations should lead to outperformance. Consensus remains underweight financials.
We prefer small cap to large cap as the global economy recovers. We also prefer value to growth with financials performing well.
D.C.