23.08 Liontrust MA Quarter In Review Q2 Literature (Single) - Flipbook - Page 5
Tactical Asset Allocation
• This table shows how confident we are about markets and asset
classes, with five the most and one the least. In our most recent quarterly
tactical review (Q2), we kept our overall environment ranking at four
(five is our most bullish rating and one is the most bearish). We had
raised it from three to four in Q1 because of a change in the underlying
tone of markets. Market sentiment is still divided between fears around
the ultimate impact of inflation and high interest rates, and evidence
of more economic resilience than expected. But the underlying tone of
markets has become more positive.
• Cash has been a broadly unattractive asset class for some time, but
we raised its ranking to three in Q2, having moved it up to two in
Q1 2022. These moves reflect the fact that, on a relative basis,
cash is looking better as a store of value given the rising interest
rate environment.
1
2
• We have lowered our rating on high yield (HY) bonds from four
to a neutral three in Q2, having raised it from three to four in Q4
2022. We added exposure to HY investments at an opportune
time, with attractive spreads versus government bonds. However,
spreads have narrowed, so we decided to take some profits.
• We have raised the ranking for European small caps back to three,
in line with our now neutral view on European equities generally.
Concerns over the domestic economy are abating as Europe
continues to progress after the problems associated with gas supplies
from Russia due to the war in Ukraine. We had downgraded the
sector from three to two in Q3 2022, and from four in the previous
quarter, based on the risk of recession and inflation overshooting in
certain countries if the European Central Bank proved to be reluctant
to move aggressively on interest rates.
3
Cash
•
UK gilts
•
Global government bonds
•
Investment grade corporate bonds
Index-linked bonds
4
5
Direction of travel
•
Overall
•
•
High yield
•
Emerging market debt
Convertibles
•
•
•
Equity overall
US equity
•
US small caps
•
UK equity
•
UK small caps
•
European equity
•
European small caps
•
Japanese equity
•
Japanese small caps
•
Emerging markets equity
•
Asian equity
•
Real assets
•
Alternatives
•
Source: Liontrust, 12.05.23. Not all the asset classes are used in all the
MA portfolios and funds
Liontrust Multi-Asset Funds and Portfolios Quarterly Report: Q2 2023 - 5
