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BARCLAYS ‘COMPASS’: current economic cycle to continue into 2017

03 January 2017

  • US equity market up to record highs, led by banking, industrial and technology stocks
  • Asia remains the preferred location within Emerging Markets, with a strategic focus on Korea, Taiwan and China (offshore)

Dubai, UAE: Barclays announced today the findings of the Q1 2017 “Compass” report, which includes the Bank’s tactical recommendations on portfolio asset allocations. Published by the Barclays’ Wealth and Investment Management division, the quarterly research focuses on providing investment advice and recommendations to investors around the world, including the MENA region.

Cedric Lizin, Head of Middle East and Africa, Barclays Wealth and Investment Management

The latest edition of the Compass report, which examines major asset classes globally, highlighted an overweight allocation to Developed Markets Equities. The US stock market, which has rallied recently to record highs driven by banking, industrial and technology equities, is seen as the market of choice within the asset class. Meanwhile, continental Europe and UK equities came in second and third place respectively.

The report has increased its allocation to Emerging Markets Equities from neutral to overweight, as the business cycle is seen to have reached bottom, a view that is supported by business confidence surveys and trade data. In addition, the fundamental economic factors have positively influenced corporate profitability within the asset class.

Meanwhile, ‘Compass’ lowered its neutral allocation for Cash & Short-Maturity Bonds to underweight, due to the increased appeal of Emerging Markets Equities. In terms of Developed Government Bonds, the Q1 2017 Compass report has lowered its allocation from neutral to underweight, citing the negligible returns for most government bonds in the developed markets.

The report also maintained its overweight allocation to High Yield & Emerging Markets Bonds; this is in light of a more upbeat outlook on various risks to global growth and inflation, in addition to the attractiveness of yields on junk credit, based on a risk-reward basis.

The latest edition of the report has assigned an underweight allocation to Investment Grade Bonds, due to minimal returns on high quality corporate credit. Meanwhile, Compass assigned a neutral allocation to Commodities, highlighting that investors are more likely to benefit from tilting their investments towards oil as supply/demand issues subside. Meanwhile, gold is seen as a less attractive option as it continues to be susceptible to further US interest rate hikes. Additionally, the report assigned a neutral strategic allocation to Real Estate and an underweight to Alternative Trading Strategies.  

Commenting on the report, Cedric Lizin, Head of Middle East and Africa, Barclays Wealth and Investment Management, said: “While the new year is usually a good time to review investment strategies, we don’t expect the current economic cycle to end anytime soon. In light of world economy growth being at just above stall rates, we recommend maintaining a tactically diversified portfolio, as it is essential for protection against market volatility.

“We also advise to keep investment portfolios tactically tilted towards Developed Markets Equities, with a focus on the US and continental Europe. In addition, Emerging Markets Equities, especially those in Asia, are also expected to deliver a good proposition in 2017 to investors with the appropriate risk appetite, given the improved macroeconomic fundamentals in these economies”.

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About Barclays

Barclays is a transatlantic consumer, corporate and investment bank offering products and services across personal, corporate and investment banking, credit cards and wealth management, with a strong presence in our two home markets of the UK and the US.

With over 325 years of history and expertise in banking, Barclays operates in over 40 countries and employs approximately 130,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.

For further information about Barclays, please visit our website https://www.home.barclays/

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