Falling inflation, anticipated interest rate cuts and a growing global economy mean we’re seeing a positive outlook for investors right now.

That was the view shared by experts from the Coutts team behind our customers’ portfolios and funds at a recent Premier in Conversation event.

The virtual customer event covered how Coutts was well-positioned for today’s positive conditions in advance – and saw solid investment performance as a result. The panel also explained why Coutts was shifting from UK stock markets to focus on global equities instead.

Past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can go down as well as up, and you may not get back what you put in. You should continue to hold cash for your short-term needs.

A positive market

David Broomfield, Multi-Asset Strategist at Coutts, said the all-important US in particular was seeing solid stock market performance that reflected the country’s robust economy.

He said that, whereas US stock market performance had been driven by the so-called ‘Magnificent 7’ technology stocks – which includes the likes of Apple, Amazon and Microsoft – the situation had changed.

“An important element of this is that it isn’t just the frenzy around artificial intelligence that’s driving the positive stock market story,” he said. “We’re seeing broad-based growth, with earnings forecasts for the wider US market improving.”

This appears to be spreading elsewhere too, with positive signals now being seen from other areas such as Europe and Japan.

The US and many other major economies have benefitted from inflation falling after it reached levels not seen for decades. Dropping inflation makes it more likely interest rates will go down, encouraging people to spend while lowering companies’ borrowing costs, which can support profits and share prices.

David told the audience: “The trend of falling inflation started last year and it’s continued, so the narrative has changed from interest rates peaking to rate cuts. It’s now a question of how many cuts we’ll see.”

He did add that there were still risks in markets though.

“We are mindful that geopolitical risk is quite high,” he said. “And another potential fly in the ointment is the strength of the US dollar and the pressure that’s putting on other parts of the world.

“But overall, we’re currently seeing a bright outlook for investors.”

Moving to a more global approach

Monique Wong, Head of Multi-Asset Portfolio Management at Coutts, said investment performance had been supported by the positive economic backdrop.

The Coutts team started increasing their investment in stocks over bonds back in October, which meant the portfolios and funds were well positioned to benefit from today’s more positive climate that favours equities.

Monique said the Coutts team was making a fundamental change in the coming months, moving towards global equities and away from their current UK 'home bias'.

The UK stock market makes up less than 4% of the MSCI All Country World Index, while the US makes up 67% of it. But currently, about 40% of Coutts’ own equity allocation comes from the UK.

Monique commented: “We want access to a truly global set of opportunities. It’s commonplace among investment houses to have a UK home bias, but there has been a trend over the last few years to move away from it.

“The UK stock market has good companies, but over time it’s become an ‘old economy’ market. Sectors in the FTSE 100 are largely mature industries – oil companies, banks, pharmaceuticals, lots of good, solid companies. But investing more globally gives us more exposure to the dynamic companies and industries currently changing the world. It gives us access to the the faster growing opportunities.”

Monique stressed this change didn’t mean Coutts was leaving the UK market all together. The team will still invest in UK stocks when appropriate. 

The three pillars of the Coutts investment philosophy

Customers who dialled into the event also heard about the three key points that underpin how Coutts approaches investing, which are:

  • taking risk where the team believes it’ll be well-rewarded – all investing comes with risk, even not taking a risk is a risk. Coutts has a framework in place to help ensure they take ‘good’ risks – those likely to be successful.
  • diversifying investments – working to pre-emptively manage any losses within acceptable limits.
  • exploiting market shifts – markets are often irrational in the short run and can change fast, which can present the best opportunities.

If you’d like to discuss your investment options, please contact the Premier team through Premier 24.

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