Investment Clock

ASSET ALLOCATION VIEWPOINT - JULY 2010

Trevor Greetham joined Fidelity in January 2006 as Asset Allocation Director. In addition to managing funds, Trevor is a member of Fidelity’s Asset Allocation Group. Prior to joining Fidelity, he spent ten years at Merrill Lynch, where he was Director of Asset Allocation. Trevor began his career with UK life insurer Provident Mutual. He holds an MA in Mathematics from Cambridge University and is a qualified actuary.

The Investment Clock approach generates growth and inflation readings based on past trends and the current momentum of lead indicators. These indicators are updated on a monthly basis to build an expectation of how the global economy may perform over the coming three to six months.

The growth reading sets the relative weighting of cyclical and defensive assets (North-South on the clock diagram). The inflation reading sets the weighting of financial assets versus real assets (East-West).

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HIGHLIGHTS

Macroeconomic conclusions

	Evidence of a peak in global growth is gathering, but the recent G20 meeting underlined the determination of European governments to cut spending all the same
	Hopeful that we are about to see merely a moderation in the pace of recovery but talk of double dips will be even more pronounced by the end of the year, by which time there will be plenty of evidence of things slowing down, especially in the eurozone

Key asset allocation conclusions

	Remaining bullish about 2011 as eventually central banks will be forced to step in and ease policy further, but the likelihood is we will see further underperformance from pro-cyclical investments in the meantime
	Slightly underweight risky assets as global growth and inflation lead indicators peak

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