Investment strategy update: taking equity to underweight, remaining overweight US equities

Brad Holland

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Nutmeg’s fully-managed portfolio customers will see a further two changes in their asset allocation in addition to the risk reduction we executed on the 10th May. On Thursday (23rd May 2019), thNutmeg team took equity exposure to a small underweight compared to our expected average weight over the long term (between 2% and 4% lower according to risk level). We did this as a further precaution in case the ongoing trade dispute between the US and China leads to a deterioration in global trade.


The focus of the trade spat has sharpened around technology companies, so Thursday’s two trades involved selling tech-heavy equity indices. We sold out of an emerging-market Asia holding, using those funds to purchase Canadian equities. Canada’s geopolitical relationship with the US is now on the mend (after the renegotiation of the North American Free Trade Agreement) and Canada, an oil producer, could benefit if US-Iran tensions escalate and lift oil prices. 

Our second trade on Thursday was to take some profits on our US technology stocks by at least halving customer holdings of companies in the NASDAQ index. The NASDAQ is up over 17% in the year to 23rd May. These companies are likely to suffer if Chinese tech companies no longer have access to US technology parts and supplies. We used the cash raised from this sale to purchase short-dated US high yield bonds. High yield bonds have a high correlation with equity markets, albeit with much lower volatility. We would expect high yield bonds to perform well if oil prices rise. 

We have made these trades as a precautionary measure. Should the US and China patch up their differences after G20 leaders hold their next meeting in late June, there is every chance that global trade will recover into the end of 2019. That would be positive for risk assets. 

In other news, the UK political scene is heating up with Brexit and the possibility of general election in the near future. 

Nutmeg’s investment team will continue to monitor events at home and abroadlooking after our fully managed customers’ money every day.

Risk warning

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past or future performance indicators are not a reliable indicator of future performance.



Brad Holland
Brad is Nutmeg’s director of investment strategy. A veteran – 28 years at last count – in financial markets, he started his career as a professional economist at the Australian Reserve Bank. He now specialises in economic and financial market strategy within investment management. Brad studied post-graduate quantitative economics at the University of Queensland, Australia. Despite living in London for 20 years now as a naturalised British citizen, he’s still not quite ready to support England-v-Wallabies.

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