Liam Goodbrand

Q4 brought confirmation of Trump 2.0 and with that, the market started pricing in a flurry of policies that the new Government is expected to enact. However, the economic outlook and current monetary policy situation mean that simply repeating the investment decisions of 2016 are not the answer. Initial optimism of what Trump may do has provided a shot of adrenaline to areas that performed well last time but we don't see enough evidence that Trump will have the same levers to pull this time. Positive equity market momentum could continue to push stocks higher which is why we still have a near neutral stance, but on a risk-adjusted basis, Government bonds still look attractive and we have a positive stance on duration – this can't be ignored.

In the UK, valuations remain at comparatively low levels to the US and we see several opportunities for stock pickers to take advantage of these mispricing's rather than buying an index tracker. This is why we hold an overweight position in the UK where we look to pick some of these stocks ourself. Underweighting emerging markets balances our equity position, largely on the account of a lack of confidence in the Chinese stimulus packages. Given ongoing debt deflation in the economy and depressed sentiment particularly among households due to falling house prices and savings rates (where the majority of Chinese wealth is held) the stimulus measures announced so far may not be enough to create a cyclical recovery in the mainland economy.

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