Great-West Life investment subsidiary, GLC Asset Management Group (GLC), believes it's time to moderate overweight equity positions, and underweight fixed income to protect against a slowing market.
“Today, investor, business and consumer optimism is high. Yet as a natural progression, the further along the economy rolls the harder it becomes for conditions to improve. Eventually a normal slowing of the economy is healthy and to be expected,” says Brent Joyce, GLC’s Chief Investment Strategist.
In its 2018 Capital Market Outlook report, GLC contends that economic signs highlight greater uncertainty for capital markets, but not to the point of returning to a balance between equities and bonds.
“At the current pace, we see supportive conditions lasting long enough that we believe it is too soon to move to a neutral stance, but caution is warranted, and we need to be nimble in our investment positioning,” says Joyce.
GLC’s base scenario is that the global economy has enough momentum, and that inflation and financial conditions will remain accommodative long enough, that they continue to favour equities over fixed income.
Less optimistic about equity return prospects
However, GLC adds that it is less optimistic about the return prospects for equities, and similarly, less pessimistic about fixed income today than it was six months or a year ago.