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Q&A: No longer an overweight position in equities

What happened?

The Strategy & TAA Group of ING Investment Management has decided to remove the overweight position in equities versus fixed income in multi-asset portfolios. We now adopt a neutral stance. We also reduced our overweight commodities to neutral.

In our regional allocation, we increased our overweight position in emerging markets at the expense of Japan. We also decreased our underweight in the US at the expense of Europe. All in all, our principal bet is now an overweight emerging markets versus an underweight developed markets.

Why cut back the overweight equities?

After a period of positive news flow for financial markets on the back of the Q2 earnings season and the European bank stress tests, it has become more difficult to identify new near-term catalysts for further equity market performance. Moreover, less cyclical and policy support is anticipated going forward. Macroeconomic data have been disappointing, although we have seen positive surprises in Europe. With fiscal and tax issues looming in 2011 and economic growth prospects being questioned again - in particular for developed economies - we decided to reduce risks in our mixed portfolios. Despite cheap valuations and near-record company results, we see a lack of catalysts for substantial equity gains in the near term. Moreover, quantitative TAA signals such as liquidity and market momentum are signalling caution.

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