The longest expansion in the US economy since 1857 was followed by its shortest recession. Policy makers are erring on the side of generosity and a strong upswing is in train, one that raises the risk of a return to the shorter boom-bust cycles of the past.
We diversify broadly and tilt exposures tactically towards asset classes likely to do best as conditions change using our Investment Clock approach. We are in ‘Overheat’, overweighting commodities and high yield bonds versus government bonds. The economic recovery has longer to run but stocks could pull back this summer on rising Covid-19 cases or signs of tighter policy and we have cut exposure to a small overweight. Our multi asset funds have performed well during the inflationary economic re-opening. Tactical asset allocation has been a strong contributor helping the Multi Asset Strategies Fund to move to new highs. The downside risk management in this fund will come to the fore when the economic expansion next hits wobbles or come to an end.