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2021 asset allocation recommendations

Posted on January 12th, 2021

The Asset Allocation Committee (“the AAC” or “the Committee”) has therefore consolidated its positive views on economically sensitive assets, but the “risk on” tenor remains moderate. High quality emerging market local debt is represented by Hungary, Singapore, Poland, Czech Republic, Israel, South Korea, Thailand, China, Chile, and Malaysia. Pacific Investment Management Company LLC (“PIMCO”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). The global pandemic was a black swan event that caused the biggest quarterly drop in global GDP and increase in unemployment since the Great Depression. Overall within our multi-asset portfolios, we favor a modest overweight to risk assets – both equities and credit. Furthermore, while progress on the development of a vaccine has been heralded, the timeline for mass production and distribution remains unknown. Risk positive asset weighting for the start of 2021; Themes to focus on include Asia, technology and the green revolution ... • Tips and recommendations - to beat the market • Portfolio clinic & Mr Bearbull - build a well-planned portfolio The first half of 2021 could offer more opportunities to lean into the recovery as it develops. Significant monetary and fiscal support has already been unleashed as policymakers were quick to respond earlier in 2020 (see Figure 1). While the future monetary and fiscal policy mix will be a critical factor in determining the longer-term path of inflation, we believe the risks are skewed to the upside. One way to measure this is via the relative spread between the earnings yield on equities and the spread on corporate bonds. From a regional perspective, we expect cyclically oriented equities – such as in Japan and select emerging markets – to benefit as the recovery continues in 2021 (see Figure 4). Investors seek higher returns. DIY Asset Allocation Weights: January 2021. We anticipate that UK mid- and large-cap equities will fare much better in 2021 than they have in 2020, provided vaccines prove effective in winning the battle against COVID-19. International Bond Fund (U.S. Dollar-Hedged), LDUR - Enhanced Low Duration Active Exchange-Traded Fund, MINT - Enhanced Short Maturity Active Exchange-Traded Fund, MFEM - RAFI Dynamic Multi-Factor Emerging Markets Equity ETF, MFDX - RAFI Dynamic Multi-Factor International Equity ETF, MFUS - RAFI Dynamic Multi-Factor U.S. Equity ETF, Targeted Municipal Ladder Managed Account, Gurtin Municipal Extended Value Managed Account, Gurtin Municipal Intermediate Value Managed Account, Gurtin Municipal Stability Managed Account, EMNT - Enhanced Short Maturity Active ESG Exchange-Traded Fund. The information provided herein is not directed at any investor or category of investors and is provided solely as general information about our products and services and to otherwise provide general investment education. The improvement in fundamentals should bode well for risk markets and cyclical assets in particular. That said, they remain bearish on a large portion of developed market With further advancements in COVID testing, contact tracing, and vaccine deployment diminishing the need for social distancing, economic growth should recover further. Over the fourth quarter, the more cyclical equity markets of Europe and emerging markets outperformed. Asset Allocation Update: Diversified Strategist Portfolios (DSP) December 2020 1 2021 OUTLOOK A V-SHAPED RECOVERY We are moderately overweight risk — with a preference for high yield bonds and global listed infrastructure — entering 2021, as we expect fundamentals will catch up to the recent market surge. 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