The UK private bank is focusing on different forms of diversification to handle the uncertainties of the current market environment.

Brown Shipley, a UK private bank, is tilting towards a slight overweight stance on equities, while spreading exposure, holding gold and taking other measures to protect against a possible return of volatility.

The firm has cut its tactical US equity exposure. On fixed income overall, it has cut exposure, it said in its monthly update on positioning. It has gone overweight on gold, from a previous neutral position, it has cut US dollar and pound sterling exposure, and taken a more positive stance on broad emerging market foreign currencies.

Within the equity bucket, the bank is overweight of world “minimum volatility” stocks, US equal-weighted equities, Europe excluding UK stocks, and Japan. It is neutral on UK stocks and Pacific ex-Japan equities. In fixed income, the firm is negative US investment trade debt, and neutral global high yield and emerging market debt, and overweight European investment grade debt.

The main thrust of Brown Shipley’s investment message is that it is increasing diversification – “it is more important than ever now,” Daniele Antonucci, chief investment officer, Quintet Private Bank, parent of Brown Shipley, told journalists at a briefing in London yesterday. 

Since markets recovered following the slide in early April, uncertainties remain about what the Donald Trump administration will do about tariffs, and possibly, the taxation of US Treasuries-related income (known as Section 899).

The outlook for US and European economic growth points to convergence in 2026 and beyond, Boryana Perfanova, client investment specialist, told the same briefing. “We are moving to an environment where we are more likely to get moderate growth and slowing inflation.”

The firm said there’s a case for holding emerging markets because they tend to perform more strongly when the dollar weakens, as this reduces domestic inflation pressures in these markets. Emerging market equity valuations are also relatively attractive, it said.

Another way to diversify, the firm explained, is looking for broad and intersecting investment themes, such as cybersecurity, technology and AI, defence, healthcare, infrastructure, clean energy, and the aspiration economy (luxury, etc).

Weightings
As Brown Shipley has cut holdings of some US stocks, such as those with high exposure to large cap, big techs, it has moved towards equal-weighted US equities instead. (This also highlights how wealth managers are trying to avoid concentration risk issues that can build in capital-weighted market indices.)

The firm has cut its US dollar exposure; rising US Treasury yields, amidst concerns about expanding US public debt, have raised questions about US bonds and the safe haven status of the greenback.

Antonucci turned to the topic of Japan. 

“One of our most significant recent moves has been increasing exposure to Japanese equities, which offer attractive valuations and strong diversification potential,” he said. The bank argues that after years of deflation, inflation is finally returning – to a degree – in Japan. This prompts the Bank of Japan to stand apart as the only major central bank that is raising interest rates.