Craigs Investment Partners is moving back to a neutral stance on equities as major indices move down between 5% and 10% this year, broker Chris Timms says.
Tactically, the broking house had held an ‘‘overweight equities'' stance since March 2010, having been underweight before as well as during the global financial crisis.
It moved to neutral in late 2009.
‘‘This month, we are moving back to a neutral position for growth - equities and listed property - and income, which is cash and fixed interest assets.''
The building blocks of investment returns were economic growth and inflation, which drove interest rates, earnings and prices. When growth was strong, inflation tended to be high and that usually meant interest rates at above-average levels, he said.
‘‘Period like this go hand-in-hand with strong performances from share and house prices.''
Looking ahead, global growth was subdued and was likely to stay that way as the world gradually recovered from high indebtedness, changing demographics and other issues, Mr Timms said.
There was little sign of inflation anywhere, suggesting high investment returns were less likely against that backdrop, particularly following six strong years.
There was now a gap of about 3% between returns from shares and what investors could get from fixed interest but investors needed to be aware of the likelihood of increased market volatility, he said.
The timing was not perfect to reduce back to neutral on equities but major indices were now down to between 10% and 20% below their 2015 highs.
‘‘Our strategy has been sound in both a regional, sector and stock specific sense and this has shielded us from recent market turmoil. We also see opportunities for good companies to continue doing very well and are confidence of achieving attractive real returns.''
However, the formal move back to a neutral position reflected a more challenging outlook and a delicate balance of risks, Mr Timms said.
