Liontrust Views Winter 2023 - Flipbook - Page 7
We believe a lot of bad news has now been priced into markets
and pessimism among investors reached extreme lows by the last
quarter of 2022.
Corrections brought the prices of stocks and
bonds down to levels that factor in significant
risks ahead.
We are cautiously raising risk exposure in
our portfolios, although we are still remaining
within parameters we regard as ‘neutral’
because of the uncertainties that remain,
especially in the short-term.
Maintaining a broadly diversified
portfolio that can benefit from
exposure to a broad range of assets
is, we believe, a better strategy.
We have been underweight bonds for
some time. We are reducing this though as
opportunities are emerging to buy bonds
offering yields that are attractive relative to
the risks involved.
NG
Our
increased
allocation to bonds
also reflects our
view that the global
market for bonds
offering higher yields stands out on a riskreturn basis. The risks are higher, but the
yields paid by the bonds compensate for
this.
There are benefits in broadening our
portfolios to non-UK government bonds
because central banks in several other
countries are further ahead in terms of raising
interest rates.
The allocations that hampered our
performance in 2022, including gilts, small
caps and emerging market stocks, together
with our increasing exposure to bonds and
especially high yield, will be geared into a
market recovery.
We expect many asset classes will revert
to performances that are more aligned
with longer-term trends. For example,
the strong economic growth, favourable
demographics and improving governance
in emerging markets will deliver for patient
investors.
Investors can also take comfort from our
investment process, which uses long-term
data to align the volatility in portfolios to
their chosen risk profiles. It is a process that
has been tried and tested through many
investment cycles.
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LIONTRUST VIEWS – WINTER
7