Predicting a stronger US dollar and a decline in gold, ABN AMRO Private Banking has increased its exposure to equities and growth stocks in its Q2 2013 investment outlook.
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The bank has increased the equity exposure of its balanced model portfolio to 44% (from 40%), by trimming bonds to 44% (from 45%) and hedge funds to 5% (from 8%); while property remains at 5%, commodities at 2% and cash at zero.
Didier Duret, chief investment officer of ABN AMRO Private Banking, said: "Opportunities in the world of equities are increasing, while they are shrinking in fixed income. Despite the recent rise in equity markets, we believe an enormous gap exists between the apparent bullish consensus on equities and effective low positioning in equity markets by pension funds and private investors. Our confidence is underpinned by the growing market resilience to bad news and we also see a positive correlation between rising stock markets and the US dollar."
Further, within equities, ABN AMRO is positive about emerging Asia and Brazil, neutral on Europe, while is underweight on US and Japan.
With regards sector, industrials and healthcare are kept overweight, while typically defensive sectors such as telecoms and utilities are regarded to be underweight.
The bank also recommends looking into growth companies, rather than high-dividend stocks.
Further, though ABN AMRO remains underweight fixed income and government bonds, it is positive in Asian corporate bonds and says that yield opportunities exist in selected Spanish and Italian bonds, as well as in the utilities and telecoms sectors.
ABN AMRO advises investors to take profit on longer maturities and to shorten the duration of portfolios to five years or less, with hedging advised via diversified funds of funds and long/short fixed-income funds.
