Graeme Harrison, chairman of ARC, says the low levels of allocation to cautious mandates may be a legacy of the decade when equities generally rose.
Harrison expects 2023 to be a year in which the allocations to cautious portfolios increases, as a function of investors mindset changing due to the volatility of the past year.
Continued caution
David Jane, multi-asset investor at Premier Miton, is another investor who is cautious about the outlook for 2023, partly because he expects inflation to linger at higher levels than many market participants currently expect.
He feels this could mean gold performs well in 2023, and also expects different types of equities could do well.
Jane says: “While the consumer sector is especially important for the US economy, last year earnings growth at the energy companies was a major driver of overall profit growth.
"With oil prices flat to down, profit growth here is not likely to be as strong. However, other sectors may take up the running. Base metals prices have been strong and demand is picking up because of China reopening and energy infrastructure investment."
According to Jane, industrials have also recently been performing strongly, partly on the reshoring and deglobalisation argument. While these factors are unlikely to be impacting current profitability, he feels cost pressures may also be an issue.
Jane adds: "Outside the US, in Europe and Japan, we would expect to see early indications of any economic slowdown. These economies are generally seen as more sensitive to economic condition than the more resilient and consumer focused US.”
So while there is reason for cautious optimism, and an expectation that riskier assets might come into their own later on down the line, the general feeling is to hold off ramping up the risk in portfolios.
David.thorpe@ft.com
