Intralink Investment Outlook & Views
Happy New Year!
However, we work in financial years so we are only half way through.
It has been a good start to the financial year driven by accommodative Central Banks injecting monetary stimulus (liquidity) into markets, the ongoing recovery of the US economy, the stabilisation of the Chinese economy and the level of global systemic risk has fallen arguably to its lowest levels since 2008.
Top down macro type issues have dominated the direction of global markets in the last 6 years (post GFC) and as we look forward we see fewer of these macro issues/risks evolving to derail the current direction of markets. As a result 2014 portfolio construction will be less driven by macro picks and more by stock specifics driven by bottom up analysis, so it makes sense for investors to take stock of some structured shifts underway and re-orientate their strategic holdings whilst bearing in mind the basic principles of investment management have not changed.
Firstly, at the core is the idea investors should not take unnecessary risks. This means investors should diversify across and within asset classes. As 2014 unfolds we therefore recommend reviewing strategic asset allocation positions.
Secondly, it can be easy for investors to underestimate the risk of orientating portfolios too close to home. To this end changes in portfolio construction in favour of assets sensitive to $US earnings and diversifying globally through global ETF’s and companies are recommended together with taking into account the above mentioned themes.
This does not mean that there will be any change regarding our focus on quality investments and risk management or our love of income, especially franked. What is important is that we remain flexible and not blinded by one dimensional thinking.