Neutral equity allocation going into the new year
There was however renewed unease in response to the latest threats by the US President-elect towards the BRICS group of emerging economies, threatened by Trump with punitive tariffs of 100 percent if they fail to clearly commit to the US dollar as their reserve currency. Increasingly critical of the US currency, the BRICS countries are endeavouring to create their own reserve currency with a view to reducing their dependence on the US dollar. In response to Trump's threats, stock markets in these countries posted below-average performance, with only the Chinese equity markets making any significant gains. The upturn in Chinese share prices is likely to have been driven in particular by renewed hopes of fiscal policy support measures provided by China’s government. But given in particular the fact that Donald Trump currently sees punitive tariffs as an all-purpose weapon to steer negotiations in his favour, uncertainties on the financial markets have increased in many respects and look set to continue into the new year. While there are opportunities in conditions like these, there are also risks, which is why prefer a neutral equity allocation overall. We are therefore taking profits on emerging market equities and neutralizing our overweighted position in this investment.