ABN AMRO Private Banking has further built its overweight allocation in equities by reducing cash, in its Q4 2013 Investment Outlook – Gaining Traction.
The bank said it sees a progressive acceleration in the global economy, with major developed nations contributing to almost 4% growth in 2014 and providing increased demand for emerging economies to recover some of their previous momentum.
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According to the bank, fundamentals in the real economy will effectively replace the US asset purchasing programme, but does not expect a tightening of US monetary policy until early 2015 – when rate rises are likely to be gradual and clearly communicated.
Didier Duret, chief investment officer at ABN AMRO Private Banking, said: "The most interesting aspect of the current situation is not the potential impact of possible changes in US Federal Reserve policy, but the underlying forces of accelerating, self-sustained global economic growth. We have therefore reduced our cash position and further increased our exposure in equities – particularly in the SME sector and in companies which are in the engine room of this global economic recovery."
Since the last quarter, the equities allocation in its balanced model portfolio has been increased to 44% (from 40%) while cash has been trimmed to 9% (from 13%). Bonds remain at 37%, while hedge funds, property and commodities retain weightings of 5%, 3% and 2% respectively.
The bank added that it remains Overweight in equities but Neutral in the US and Europe. It has moved Neutral in Emerging Markets last month, but remains Overweight China.
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By GlobalDataThe bank also revealed that it has moved Underweight consumer staples, food beverage & tobacco on valuation grounds.
However, the bank remains Overweight in the oil services, chemicals, commercial services, capital goods, consumer services, automobiles & components, pharmaceuticals, biotech & lifesciences, insurance and IT hardware & equipment sectors.
The bank also remains Underweight fixed income (although Overweight low investment grade and high yield credits) and expects yields to continue rising in response to monetary policy normalisation.
In currencies, the US dollar, British pound and Swedish krona are favoured, alongside the Mexican peso, Polish zloty and Chinese yuan.
The bank said it maintains a bearish view on commodities, but recommends long/ short equity and event-driven hedge funds.
