Investment Strategies

UK Wealth House Stays Mildly Bullish On Equities

Amanda Cheesley Deputy Editor 21 June 2024

UK Wealth House Stays Mildly Bullish On Equities

Daniele Antonucci, chief investment officer at Quintet Private Bank, parent of Brown Shipley, discusses the dynamics that will drive the global economy and financial markets over the second half of 2024, and highlights the firm’s asset allocation.

At a media event in London this week, Daniele Antonucci (pictured) at wealth manager Brown Shipley underlined how the case for equities over the medium to long term is compelling. However, in view of market volatility, the firm stays globally diversified with a slight equity overweight.

Antonucci said the firm’s single greatest exposure is to US equities, where they remain neutral overall, reflecting longer-term megatrends in areas such as artificial intelligence. The private bank also maintains its overweight global small-cap equity position, reflecting attractive valuations and the favourable economic backdrop, with interest rates coming down.

By comparison, Brown Shipley remains slightly underweight on European equities. While the fundamental outlook is improving in Europe and a case could be made that increased exposure to European equities is now warranted, Antonucci believes that political uncertainty could increase in the near term, given the potential ramifications of recent European elections and the upcoming French elections.

Antonucci said the French elections on 30 June and 7 July are more of a market mover than the UK ones. He said that in France the main parties are at the far end of the political spectrum, whilst in the UK they are more centrist. Other investment managers, such as UBS Global Wealth Management, EFG Asset Management and Edmond de Rothschild Asset Management, have also drawn attention to the potential impact of the French elections on European equities. Benjamin Melman at Edmond de Rothschild AM has lowered his risks within his asset allocation, first on European equities, following the announcement of the snap election. See more commentary here.  

“We will maintain our slight underweight on European equities and then reassess once current uncertainty clears,” Antonucci added.

He expects the eurozone economy to expand by more than 1 per cent this year, which is up from his earlier forecast and slightly above current consensus. Meanwhile, Antonucci has lowered his full-year forecast for the US economy to 2 per cent, slightly below current consensus. He believes that a recession is unlikely over the next six to 12 months, seeing a likely soft landing in the US and a gentle acceleration in the eurozone.

As in the eurozone, the UK economic outlook has improved since the start of the year. The recession risk there has significantly decreased, according to Antonucci, who now expects full-year UK growth to nearly reach eurozone levels. Brown Shipley’s UK growth expectations are up from its earlier forecast and slightly above current consensus. With the Conservative Party trailing far behind the Labour Party, Antonucci believes a Labour win on July 4 is unlikely to change the UK’s economic outlook and the potential market reaction could be muted, although investors will keep an eye on potential individual fiscal measures.

Meanwhile, growth in the massive Chinese economy appears to be stabilising. However, China continues to grapple with structural challenges such as a poor demographic outlook and property sector crisis. Other emerging markets such as India, continue to have solid long-term potential. That mixed picture is one of the reasons why, overall, Brown Shipley is neutral on emerging-market equities.

Turning to fixed income, Antonucci sees global high-yield valuations as currently expensive, while European investment-grade bonds appear more appealing, so he maintains his increased exposure to them.

Focusing on currencies, Antonucci said: “If eurozone or UK rates were to fall significantly below US rates, the euro and pound sterling would risk depreciating versus the US dollar, as exchange rates tend to be driven in the near term by interest-rate differentials. If that were to happen, import-price inflation would accelerate in the eurozone and the UK, which would put the inflation objectives of the European Central Bank (ECB) and Bank of England at risk.”

He said, however, that this is not the firm’s base-case scenario: “We expect the euro and pound sterling to hold steady versus the US dollar in the near term, with some recovery anticipated on longer horizons.” 

On commodities, he believes that gold may currently be slightly overvalued but it serves as a valuable strategic hedge, as do broad commodities, given geopolitical risks.

Wrapping up at the event, Antonucci highlighted the firm's preferred megatrends, including cloud computing, electric vehicles, clean energy, robotics and automation, as well as saving water and waste to help the planet. 

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