Ben Kumar

The final part of 2024 was dominated by noisy events such as the US election, the UK Budget and Ukraine. So investors can be  forgiven from being distracted the fact that economies are actually bobbing along a pretty normal path.

Inflation is creeping closer to the 2% central bank target and interest rates are coming down (albeit slowly), so the outlook moving forward is positive (albeit not necessarily the extraordinary levels of growth seen post-COVID).

Of course this journey towards a more “settled” economic period will still have its moments of market volatility, but the beauty of diversified portfolios is that they are set up to navigate that environment as a default – that’s WHY they exist. So we are around neutral on equities, ensuring that we have a diverse exposure across regions and sectors; in particular looking to mitigate the concentration seen in the US (33% of the index in the top ten companies? No thanks).

By focussing on really simple approaches such as our equally weighted allocation in the US (top ten companies are 2% of the index …) our portfolios should benefit from the broadening out of earnings expectations we are beginning to see. And in the fixed income world we’re also around neutral on duration. Sure, rates are coming down; but not at a likely rate which would suggest a strong overweight.

In our view, this is a world which calls for duck-onomics in our portfolios. No, we haven’t gone quackers. We just think that for much of the time, portfolios shouldn’t be doing too much – like a duck paddling along on the current. There’s the odd branch to dodge, or fish to eat, or wave to ride, but nothing worth diving down or taking off for. We’re letting the current work, while still keeping an eye on the river ahead.

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