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HORNS OF A DILEMMA

Rory McPherson, head of investment strategy at Psigma, says despite positive economic indicators, uncertainty over US interest rates, political risk and high valuations are casting shade on global equities

Equity markets currently present a dilemma for asset allocators. On the one hand, corporate earnings are buoyant, political risk in the eurozone is diminishing and economies worldwide are in the first synchronised recovery since the turn of the decade.

These circumstances should favour an overweight position in economically sensitive assets such as equities, according to Rory McPherson, head of investment strategy at Psigma. But on the other hand, there is the thorny issue of over-inflated valuations, which should act as a warning to the markets to exercise caution.

Psigma’s portfolios reflect McPherson’s concerns. They appear quite defensive with plenty of cash, following a recent bout of profit-taking that sought to refocus the fund on high-conviction assets and away from “lala land” valuations.

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