Current economic cycle to continue into 2017

Cedric Lizin, Head of MEA, Barclays Wealth and Investment Management

The US stock market, which has rallied recently to record highs driven by banking, industrial and technology equities, is seen as the market of choice within the asset class, in a recently released market report. However, the continental Europe and UK equities came in second and third place respectively.

Barclays has revealed these findings of the Q1 2017 ‘Compass’ report, which includes the Bank’s tactical recommendations on portfolio asset allocations.

The Compass report, which examines major asset classes globally, highlighted an overweight allocation to Developed Markets Equities.

The report has increased its allocation to Emerging Markets Equities from neutral to overweight, as the business cycle is seen to have reached bottom, a view that is supported by business confidence surveys and trade data. In addition, the fundamental economic factors have positively influenced corporate profitability within the asset class.

Published by the Barclays’ Wealth and Investment Management division, the quarterly research focuses on providing investment advice and recommendations to investors around the world, including the MENA region.

“While the new year is usually a good time to review investment strategies, we don’t expect the current economic cycle to end anytime soon. In light of world economy growth being at just above stall rates, we recommend maintaining a tactically diversified portfolio, as it is essential for protection against market volatility,” said Cedric Lizin, Head of Middle East and Africa, Barclays Wealth and Investment Management, while commenting on the report.

‘Compass’ has lowered its neutral allocation for Cash & Short-Maturity Bonds to underweight, due to the increased appeal of Emerging Markets Equities. In terms of Developed Government Bonds, the Q1 2017 Compass report has lowered its allocation from neutral to underweight, citing the negligible returns for most government bonds in the developed markets.

“We also advise to keep investment portfolios tactically tilted towards Developed Markets Equities, with a focus on the US and continental Europe,” pointed out Lizin.