UAE. Barclays has released the latest edition of Compass.
• Use current setbacks to add to positions in inexpensive developed equities and high yield credit
• Trim holdings of pricey government bonds
Kevin Gardiner, Head of Investment Strategy, EMEA, for wealth and investment management at Barclays, commented: “The strong run in stock markets in the first quarter of 2012 doesn’t mean that the risks facing the global economy and euro area banks have suddenly evaporated, but it does mean that some investors will have made a sizeable profit that they may be tempted to realise soon.
"Business surveys are consolidating, the price of oil is re-emerging as a near-term concern, and the calendar is ticking remorselessly towards May (as in, “Sell in …”). All of this suggests that we should not be too surprised at a setback at some stage – one may be at hand as we speak.
“As we see it, however, the big picture is unaltered, and likely more positive than feared in 2011. Economic growth globally is probably not falling below stall speed; the euro area banks are being cushioned by the ECB; and stock valuations remain on the low side. With this in mind, we are inclined, again, to advise against trying to fine-tune portfolios in anticipation of short-term volatility, because to do so might be to run the risk of missing a resumed rally.
“Against this backdrop, we continue to recommend that private investors own a diversified portfolio that currently includes slightly larger than usual allocations to developed stock markets and high-yield credit, and smaller than usual weightings in government bonds.”
For investors who are worried about higher oil prices and how they might hedge against it, Kevin adds: “It is impossible to know how the current tensions between Israel and Iran will ultimately be resolved, however, it is likely that oil prices will be well supported if the status quo persists and could potentially rise dramatically if tensions escalate.
"For this reason, investors should consider an allocation to investments which would perform well and could help offset other investment losses if the price of oil rises abruptly. These include the oil and gas sector and direct oil exposure.”
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