Chief investment officer Markus Stadlmann, explained that the latest asset allocation changes at the bank stem from a belief UK and Japanese bonds will continue to benefit from loose monetary policy as US bonds start to be impacted by Federal Reserve rate rises.
Stadlmann noted that while the main focus for investors in the short term will be the US election today, attention will soon likely shift back to interest rate decisions by central banks, with investors and economists expecting the Fed will raise borrowing costs at its December meeting.
On the equites side of the asset allocation, Lloyds is holding things steady with Japan the favoured market at the moment.
“We are maintaining our smaller allocation to UK equities because of continuing uncertainty and anticipated market volatility,” he said. “We retain moderate holdings in the US and Europe and are keeping our overweight position in Japanese equities where we feel prospects are more positive.”
Lloyds remains unconvinced about the prospects for a recovery in oil and other commodities however. “Although the price of commodities has recovered slightly, we still do not foresee sufficient gains to merit investing in this asset class at the moment,” he said.
“Our overall outlook for the remaining months of the year is one of caution amid tepid global economic growth, political uncertainty and a lack of clarity around the UK’s departure from the EU,” Stadlmann said. “Until there are signs that the economy is on a sure footing and corporate profits are growing sustainably, we will retain our lower allocation to assets such as equities and commercial property and our increased allocation to bonds.”