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- Equities in in the US and Europe provide the highest growth prospects
- Emerging Markets equities upgraded to neutral
Dubai, UAE: Barclays has announced the findings of its latest "Compass" report, which includes the Bank's tactical recommendations to portfolio asset allocations. Published by the Barclays' Wealth and Investment Management division, the research focuses on providing investment advice and recommendations to investors around the world, including the MENA region.
The Q2 2016 Compass, which examines major asset classes globally, has increased its overweight allocation on developed markets equities to strong overweight as the US and Continental Europe are seen to have the highest growth prospects. This is based on two factors including the consumer real disposable income in the United States maintaining its healthy growth rate and the corporate profitability in Europe having the largest potential for recovery as revenues continue to grow.
According to the report, emerging markets equities were upgraded to neutral since the gap between the current market sentiment and the actual economic reality is expected to decrease in the future.
The report has also reduced cash & short-maturity bonds from overweight to neutral. During the current market turbulences, cash continues to play a critical role in capturing appropriate opportunities when they arise since it can be used as an investment in other asset classes.
The allocation for investment grade bonds was maintained at neutral due to their high prices. Furthermore, the allocation towards developed market bonds remains neutral over the next 3 to 6 months due to low nominal yields and tight spreads.
While remaining underweight, Barclays Tactical Allocation Committee added back a little weight to High Yield and Emerging Market Debt allocation last year, taking advantage of price weakness, which has continued since on fears that the end of the current business cycle is close. For the sub asset class as a whole, Barclays sees value with the yield at current levels. Implied default rates are inconsistent with Barclays' view that the US economy can continue to move along without alarming consequences.
The report maintained its underweight allocation for commodities in the second quarter, as a result of the slowdown of the Chinese economy and excess supply, citing oil and copper as examples.
Commenting on the Q2 2016 Compass report, Vic Malik, Head of Global Investments and Solutions for the Middle East and North Africa (MENA) at Barclays Wealth and Investment Management, said: "We see dissonance between market fundamentals and sentiment, which continues to cast fears on the global stock markets and depressing valuations. Therefore, we believe that investment portfolios should continue to lean towards equities in the developed markets, especially the US and Continental Europe.
"During the second quarter, we don't see the fixed income asset class as a viable option for achieving growth, due to several factors including the sharp market fluctuations, depressed oil prices and low bond yields."
In addition, the report also assessed the US consumer as the key driver of global growth and how crowd behaviour affects investments.
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About Barclays
Barclays is a transatlantic consumer, corporate and investment bank offering products and services across personal, corporate and investment banking, credit cards and wealth management, with a strong presence in our two home markets of the UK and the US.
With over 325 years of history and expertise in banking, Barclays operates in over 40 countries and employs approximately 130,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.
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For further information, please contact:
Khaled Abdulla
Barclays
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khaled.abdulla@barclays.com
© Press Release 2016
