Our asset allocation is dominated by a wish to stay diversified in a fragile environment. Continued ‘noise’ around trade is likely to leave markets alternating between disappointment and hope. With this in mind, we have a neutral stance on government bonds and developed-market equities alike, although we still see select opportunities in equities and appreciate the protective function of safe-haven bonds. Geopolitical events such as the tensions between the US and Iran will lead to volatility, which can be exploited tactically. Potential spikes in volatility also mean we have a positive stance on gold.
We also favour illiquid assets to mitigate volatility and boost returns in a low-return environment. As equities’ 2019 performance is unlikely