MONTHLY ASSET ALLOCATION INSIGHTS
Equities still lead, but the bond market is changing the argument
🌍 The Big Picture
September tested the idea that higher interest rates must be bad for shares. The Federal Reserve raised rates for the first time in three years, the US 10-year Treasury yield moved above 5%, and Brent crude stayed above $100 a barrel.
Yet major investment houses have largely kept a positive stance towards equities because economic growth and company profits remain firm.
What has changed is the bond discussion. Managers increasingly distinguish between short, medium and long maturities rather than treating government bonds as one asset. Credit views are also splitting as higher yields offer more income but tight spreads leave less protection if conditions worsen.
AI investment remains an important part of the equity case, although its huge financing requirements may itself help keep borrowing costs high.
📊 TAA Consensus Tracker
What the managers are saying
BlackRock
BlackRock believes strong earnings and AI investment can support shares even while large financing requirements keep long-term borrowing costs elevated.
UBS CIO
UBS argues that strong economic activity and company profits can offset some of the pressure created by higher bond yields.
Invesco
Invesco sees a world economy that is slowing modestly but still growing above its longer-term trend. Strong profits and AI spending continue to support equities.
Amundi
Amundi favours a wider spread of equity exposure, including Europe, Japan and parts of emerging markets. It has also increased its positive stance on gold.
BCA Research
BCA believes investors may be overestimating the damage that 5% US bond yields will cause to the economy and corporate profits.
Equities: Higher Yields Haven't Broken the Case
None of these managers is building its central view around an imminent recession. Company earnings remain the main reason they are prepared to hold equity risk.
BlackRock expects AI and infrastructure investment to support profits, while UBS continues to see economic activity and earnings providing enough support to offset some of the pressure from higher interest rates.
That helps explain why equities remain ahead of government bonds in most tactical allocations.
Bonds: Maturity Now Matters More
There isn’t one institutional view on government bonds.
BlackRock worries about long-dated bonds because inflation uncertainty and government borrowing could keep long-term yields elevated. UBS sees attractive income opportunities but favours shorter maturities. Amundi is more balanced, while BCA has reduced its government-bond exposure.
For a UK investor, a two-year gilt and a thirty-year gilt may carry the same government name, but they can behave very differently when interest-rate expectations move.
Credit: Higher Income, But Less Room for Error
Corporate bonds offer attractive headline yields, but managers disagree about whether investors receive enough extra income for taking corporate risk.
BCA has upgraded high yield, Amundi likes global investment-grade credit, while BlackRock prefers avoiding the weakest borrowers and companies issuing particularly large amounts of debt.
The disagreement itself is useful. It suggests credit should be considered separately from government bonds rather than treated as one fixed-income allocation.
Where the managers disagree
Government bonds provide the clearest divide.
BlackRock sees long bonds as vulnerable to persistent inflation and heavy financing needs. UBS sees worthwhile income opportunities, Amundi is more balanced, and BCA has downgraded government bonds.
The shared message is not that bonds should be avoided. It is that duration has become a much bigger part of the decision.
What Does This Mean for a UK Investor?
UK equities: cheap, but still waiting for a catalyst
BlackRock remains neutral on UK equities. UK shares continue to look relatively inexpensive compared with the US, but low valuations alone have not been enough to attract a stronger tactical view.
Gilts: maturity matters
Amundi has become less positive on UK government-bond duration, reflecting concern that longer-dated gilts remain sensitive to inflation, government borrowing and changes in interest-rate expectations.
For a UK investor, this means the bond allocation deserves a closer look. Short-dated gilts and long-dated gilts may both be backed by the UK Government, but their prices can behave very differently when yields move.
Global investing remains in focus
Much of the positive institutional view remains focused outside the UK, particularly on the US and selected international markets.
UK Investor Takeaway
Look inside your bond allocation – Short and long-duration bond funds can react very differently when yields change.
Credit deserves a separate decision – Higher income needs to be weighed against the additional risk of lending to companies.
So what is the overall view?
September’s message from large investment houses is fairly consistent:
Stay exposed to economic and earnings growth, but be much more deliberate about where interest-rate, credit and concentration risks sit in the portfolio.
These monthly views work best as a sense-check against a long-term allocation. They show what professional investors agree on, where opinions differ, and which assumptions may deserve another look.
Sources
BlackRock Investment Institute
blackrock.com — Weekly Commentary
UBS CIO House View
ubs.com — House View
Invesco Tactical Asset Allocation
invesco.com — Tactical Asset Allocation
Amundi Investment Institute
research-center.amundi.com — September Views
BCA Research
bcaresearch.com — Monthly TAA
© Clearly Investments Ltd. Educational information only. This is not investment advice.
