Posted on April 18, 2018

Barclays published its Q2 2018 Compass Report, which examines major asset classes globally. The report notes that today’s best performing investment portfolios are those geared towards developed and emerging market equities, in addition to high yield and emerging markets bonds. The report also reinforces the importance of maintaining a well-diversified long-term core investment portfolio.

Compiled by Barclays, the quarterly research provides investment commentary for investors around the world. The latest Compass report looks at the impact of current global issues on investments, including US policy, the new regulatory framework for fund managers (MiFID II), and the impact of news on investor behaviour.

Francesco Grosoli, Barclays’ Head of Private Bank for Europe, the Middle East and Africa (EMEA), said: “Our investment team often makes the point that the risk of political events seriously affecting the economic backdrop is overstated. That’s why we believe that a recession scenario is unlikely given the strong and broadening global economic growth. Therefore, despite recent market volatility, it makes sense for investors to put their money to work especially with inflation being relatively contained. Our investment team expect stocks to continue to outperform bonds, particularly among emerging markets and those in Continental Europe and the US.”

Grosoli added: “We’ll likely see volatility return to historically more normal levels, which is why more investors are being drawn to diversified multi-asset portfolios and active managers who stand to benefit from the slightly more challenging environment.”

The Q2 2018 Compass report kept a tactical overweight position in Developed Markets Equities, where a healthy global economy is allowing for strong profit growth across a range of sectors. Barclays also remains focused on the more pro-cyclical sectors: industrials, technology and financials. Emerging Markets Equities are also outlined as a tactical overweight allocation and remain strong overall, as evidenced by recent business confidence surveys and trade data. Asian markets remain the preferred region, with Barclays favouring Korea, Taiwan, China (offshore) and India on a strategic basis.

High Yield & Emerging Markets Bonds have been kept at a tactical overweight to benchmark, favouring Global High Yield over Emerging Markets Debt, with the former offering a higher yield and lower duration risk. Allocations to Investment Grade Bonds, Cash and Short-Maturity Bonds, Developed Government Bonds and Alternative Trading Strategies remained tactically underweight in the latest Compass report. The report also kept a neutral view towards Commodities and Real Estate, which retains pro-cyclical characteristics.