Now could be time to go overweight equities and underweight government bonds as risk-on sentiment returns to the market, according to Skandia’s John Ventre.
Ventre, manager of multi asset portfolios at Skandia Investment Group, says a “more rounded case” for a pro-risk stance in asset allocation has recently emerged.
The improvement in key economic numbers, such as the growing health of the US labour markets, and liquidity boosting measures such as the European Central Bank’s long-term refinancing operation warrant this change in sentiment, he explains.
“Of the three most straightforward ways to have a pro-risk stance in portfolios – overweight high yield, overweight equities and underweight government bonds – it’s the latter two which now have the most attractive payoffs,” says Ventre.
The manager adds that Chinese and European equities appear to be some of the best investments for achieving performance in the current environment, despite the risks created by the eurozone debt crisis and fears of a hard landing in China.
Ventre also says that those currently with a risk-on positioning, such as the one he took in the latter half of 2011, should consider taking profit from high yield bonds as they no longer offer the potential for returns seen over recent months.