Back in January, 2012 was being forecast as a tough year. Storm clouds were gathering in the shape of global slowdown risk from European public debt, US economic uncertainty and China's lower slowing pace of growth.
However, global equities have since caused investors to breathe a sigh of relief, as overall asset classes trended up significantly over the year. The year-to-date return of asset classes, as of November 30, this year, showed Global Equities (MSCI World Index) were up 14.4 per cent, long-term US Treasuries (ML 10-Year Treasury Future Index) were up 4.3 per cent, Commodities (ML Commodity Extra Index) were up 1.0 per cent while the Currencies Index (ML FX Arbitrage Index) was up 7.1 per cent.
Although the global market seems in better shape than it was at the start of 2012, the main risks in 2013 remain 1) European public debt, 2) the US fiscal cliff, 3) potential inflation risk from the global monetary easing policy, and 4) global political risks.
Global equities will benefit from the lower risk environment brought by improvement in the European public debt situation, while overall commodities and currencies will benefit from simultaneous monetary easing among central banks.
Investors can limit their exposure to global risks by allocating part of their portfolios to US Treasuries.
Amid the current volatile economic outlook, investors who focus on single assets such as equities, fixed income assets, oil, gold or foreign currencies are taking a gamble, and need to follow the market closely and exercise market timing for investment and profit-taking by themselves.
For those with little time to monitor the market, and those with low-risk tolerance, we advise considering investing in an all-weather mutual fund under a multi-asset class strategy with adequate risk level.
A multi-asset class strategy spreads your investment across asset classes with a low correlation, and is designed to protect you from over-exposure to one part of the market while providing good returns at a risk level acceptable to the investor. It aims to provide consistent returns even in a highly volatile market and helps investors allocate their money (without having to monitor the market) by adjusting asset investment in line with the prevailing market outlook.
Investment Products Strategy Group,
Asset Plus Fund Management.
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