Schroders Market Update
Every quarter, one of our asset managers from Schroders will provide an update into how the financial market is performing. Johanna Kyrklund - Group Chief Investment Officer and Global Head of Multi-Asset Investments, offers her insights on the different economic factors that influence the market conditions in the video below.
Johanna Kyrklund - Group Chief Investment Officer and Global Head of Multi-Asset Investments
Johanna Kyrklund is Group Chief Investment Officer and Global Head of Multi-Asset Investments at Schroders and joined in 2007. Responsible for investments on behalf of Multi-Asset clients globally and is the head portfolio manager of the Schroder Diversified Growth Strategy. Johanna leads the Multi-Asset Investments division, is a member of the Group Management Committee (GMC) and Chairs the Global Asset Allocation Committee.
Over the last six months we’ve been pro-cyclically positioned because our cyclical models turned green last summer. And today those cyclical models are still firmly in what we call the recovery phase of the cycle, which is the most benign phase for markets. This is because typically in this phase you see growth expectations improving but policy still very loose and indeed that is what we are seeing today.
However, we do sound a note of caution as growth expectations have risen we’ve also seen bond yields rise and that raises the hurdle for what constitutes for good investment. In some sense that rise in bond yields does pose a speed limit to returns. As a result we are now avoiding the most expensive areas of the market and are really looking to diversify our portfolios. Last year was notable because a very small group of Mega Cap turbo charged stocks led the market recovery and today we would advocate a much more diversified stance, really looking across the globe and across sectors.
Elsewhere in the portfolio we think commodities are an interesting addition to people’s portfolios because as growth expectations rise there may be some inflation concern and commodities provide quite a neat hedge against that. They also benefit from the significant infrastructure spend that is currently being planned.
However, we wouldn’t write away Government bonds, although they are obviously vulnerable to improving growth expectations, yields have adjusted quite significantly since the beginning of the year and so Government bonds are back on our radar as a diversifying position in portfolios. After all we need to remember that although obviously we are now getting vaccinated there are still some challenges to that vaccine rollout across the world.
So all in all, we do see some upside to markets, we’re fully invested, but we do think we need to keep an eye on these valuations and protect against that valuation risk by introducing a more diversified stance in your exposures.
The views and opinions contained here are those of Johanna Kyrklund, Group CIO and Global Head of Multi-Asset Investments and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.
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