Global stock markets have had one hell of a run, but I am seeing signs now that this run has come to a close. Stocks look like they are setting up for a failing rally, a lower high following the surge to new all time highs in January. This is a potentially concerning development, particularly in the face of strong investor complacency, a sharply falling USD and rising deficits and bond yields in the US. Add to the mix, record company valuations and you get quite a dangerous environment for investors.
I am therefore cutting the equity allocation in the Active Asset Allocator from 20% to 0% today and moving to full defensive position. The revised asset mix moves to 0% equities / 20% EU government bonds / 15% inflation linked bonds / 5% EU aggregate bonds / 30% precious metals / 30% cash. I will provide a more detailed rationale for this decision in the next Investor Update.