Asset Allocation: Taking Precautions

The surprising volatility in markets at the start of the month was a reminder of the increased risks as economic growth slows to potentially below trend rates, a phase the US economy may now be in for a period. While a softish landing would still seem a reasonable prospect, growth could still undershoot, and at a time of elevated equity valuations, it seems worth taking some precautions. For Australian investors, faster interest rate reductions in the US could also continue to weaken the US dollar relative to the Australian dollar and may be additional grounds for caution in regard to international equities. Accordingly, we are now advocating a moderately below benchmark weighting in equities, particularly international equities, and an increased weighting in cash, back to benchmark, while continuing to advise an above-benchmark weighting in fixed income, as outlined below.

Contact your CG Adviser for a full copy of the report.