In contrast, he feels that fixed income assets, particularly inflation linked US government bonds are attractively priced right now.
One investor who has unpicked the bonds/equity conundrum and come down firmly against US equities is Jasper Thornton Boelman, investment director at Parmenion, who cut a further 3 per cent from his US equity exposure last month, and placed the capital into bonds.
He says this was a consequence of his view that: “The yields on offer within Sterling Corporate Bonds are relatively attractive and look to be compensating investors well, even when accounting for the potential risks of slowing economic growth ahead.
"Conversely, the US equity market appears fully valued, with the market anticipating the ‘soft-landing’ scenario. We see risk to the downside in this assumption, hence the reduction.”
Kamal says: “Recession is our base case so we think caution is warranted right now. But one area where we are overweight is emerging markets. Emerging markets tend to have very long uptrends and very long downtrends. Valuations right now are the cheapest they have been for many years relative to developed market equities.
"The weakening of the dollar boosts the investment case for emerging markets, and while emerging markets often underperform when global GDP is declining, I think the low valuations make up for this.”
David Thorpe is investment editor at FTAdviser
