February 2013
This is for Investment Professionals only and should not be relied upon by private investors
Trevor Greetham joined Fidelity in January 2006. He is Director of Asset Allocation and in addition to managing funds,
Trevor is a member of Fidelity’s Asset Allocation Group.
Prior to joining Fidelity, he spent ten years at Merrill Lynch, where he was Director of Asset Allocation. Trevor began his
career with UK life insurer Provident Mutual.
He holds an MA in Mathematics from Cambridge University and is a qualified actuary.
Synchronised Global Recovery
The Investment Clock model that guides our asset allocation
decisions is in the equity-friendly ‘Recovery’ phase. As long as
inflation pressures remain absent, central banks don’t even have to
think about tightening policy. We expect rising commodity prices to
push us into ‘Overheat’ phase at some point in 2013, but central
banks are unlikely to tighten policy at the first sign of inflation.
Investor sentiment is very positive leaving the markets vulnerable to
negative shocks. However, with economic data improving and
monetary policy set to remain loose, the risk/reward picture is
skewed to the upside. Our multi-asset funds are overweight stocks,
property and commodities and underweight bonds.
Note: The red dot marks the current position of the investment clock.
LEAD INDICATORS IN FOCUS
Inflation

The Investment Clock model is in disinflationary ‘Recovery’.

Spare capacity is ample, commodity prices have lagged stocks and
economists are generally downgrading their CPI forecasts.

So far, our global inflation scorecard continues to point downwards.
Growth

Our global growth scorecard turned positive in December for the first
time since June 2012.

The Recovery phase of the global economic cycle sees growth pick up
with monetary policy remaining loose – a bullish combination for risk
markets and stocks in particular.
Inflation Rises
CURRENT ASSET ALLOCATION POSITIONING
INDUSTRIAL METALS
Growth Moves Above Trend
Overheat
CORPORATE
BONDS
HIGH YIELD
BONDS
SOFTS
ENERGY
INFLATIONLINKED
BONDS
GOVERNMENT
BONDS
Growth Moves Below Trend
Recovery

We are significantly overweight equities. Our strongest conviction is an
overweight in the emerging markets and an underweight in Europe.

We are moderately overweight commodities as they should benefit as
global growth strengthens.

We maintain a deep underweight position in bonds. Government yields
are artificially low and could rise as inflation and growth expectations
rise. Within bonds we favour high yield and investment grade corporate
bonds.
Stagflation
Reflation
PRECIOUS METALS
Underweight
Neutral
Overweight
Equities
Inflation Falls
Property
Commodities
Bonds
Cash
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