July 2024
Conditions remain favourable for equity markets overall but we trim exposure to tech stocks following their stellar run.
Asset allocation: Conditions still favourable for stocks
How high can the market go? With global equities having rallied some 26 per cent over the past eight months, that is the question investors are grappling with.
Supporting stocks, the economic outlook remains solid as fears of sticky inflation appear to have faded.
However, this positive fundamental backdrop has to be set against two potentially negative developments. First, there’s a fraught political backdrop in Europe. Snap parliamentary elections in France appear likely to leave the country in uncharted waters, with the hard right having decisively won the first round of the two-round ballot. A second countervailing force is investor positioning in stocks, which our indicators show is extremely bullish.
For all this, we still believe the balance of risks remains in favour of remaining overweight stocks, neutral bonds and underweight in cash.
