As the New year approaches it is always a time for reflection but more importantly, attention is focussed on how best to position investment and pension portfolios for the year ahead.
Our focus is always on optimising returns in harmony with our client’s risk appetite. 2015 certainly tested everyone’s understanding of risk and reinforced the need to tailor one’s risk in accordance with your own particular planning. As Justin Urquhart Stewart from Seven Investment Management always says “if you’re planning to invest don’t, unless you have invested in planning first”. Is it tolerance for risk, appetite for risk or the general attitude to risk which is the main driver?
We see so many new and prospective clients who don’t have their investment and pension portfolios aligned with their planning. This is crazy because the chances of success and fulfilment are left more to chance. A co-ordinated approach improves the probability of success.
With an interest rate rise in the US, markets have reached an inflection point. Not all assets of course respond the same way to interest rate increases. There is the contrast of course with Europe and Japan who are intent on delivering further stimulus to ensure that deflation doesn’t take a hold and a mixture of growth and confidence returns.
Typically, it is quality stocks with strong balance sheets that tend to respond best after a rate hike and this suggests a degree of caution when investing in the US. Long dated bonds are likely to experience significant volatility. Europe and Japan on the other hand, are at a different stage of the economic cycle and it is the recovery stocks here which appear attractive. We like property as an investment vehicle but it is important to differentiate the dynamics within this sector. Generally, we favour investments which have a domestic bias as opposed to the large cap environment which is more exposed to the global growth cycle and the downturn in commodity prices.