G4 Q3 2009: Lilies that fester

Building on its most recent, detailed, forecast for the UK economy, The BEST UK Forecast, Fathom integrates this outlook with projections for the G4 economies in a fully consistent system, with economic scenarios at one end and an optimal asset allocation at the other. This quarter’s asset allocation is less defensive than in recent quarters, and is broadly neutral on equities. But within that allocation, there is a clear ‘barbell’ appearance, with overweights in Europe and Japan offset by underweights in the US and UK. Hence, it seeks exposure to the potential upside, but retains a desire for protection against the possibility of a significant relapse. Overall, the allocation remains overweight bonds; and given low funding costs, underweight cash.

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