Lately we’ve been spending our downtime collating data for the latest instalment of the Asset Allocator sentiment survey, which gauges how DFMs are feeling about the various components of the investable universe. 

A particularly Swiss mood has descended over the allocator camp: that of neutrality. 

Across 16 of the 21 available asset classes upon which to gauge sentiment, the prevailing attitude was ‘neutral’, reflecting a widespread ambivalence among allocators as to where we’re headed through the final quarter of 2024. 

60 per cent of those surveyed had no strong feelings one way or the other towards equities in general, though only 6 per cent responded negatively here. 

In conversations with allocators we ascertained that this is largely down to a more benign growth environment and the expectation that an equity rally will continue to broaden out into other areas of the market.

“The bouts of greater breadth to equity markets have been helpful, as we are more diversified when compared to the global equity benchmark,” said James Flintoft, head of investments solutions at AJ Bell.

“Our allocations to the UK and China – via Asia and emerging markets – have recently shown the benefits of patience when it comes to allocating and perhaps the dangers of herd mentality when there is a very well-trodden bearish narrative established in the market.”

Indeed allocators are positive about the prospects for UK equities, with 76 per cent of allocators optimistic here and a further 71 per cent optimistic on domestic smaller companies.

But a note of caution underlined several of the responses we received, one of which was from Charles Stanley.

Their mantra is to recommend an underweight allocation to equities as the risk of 'stretched valuations and high concentration' in some regions remains.

The team has been seeking alternatives to mega-cap growth and have since increased their weighting to the S&P equal-weight index tracker.

Over in fixed income, the mood is slightly more upbeat, with almost one in two DFMs expressing positivity here, while just 17 per cent were negative. 

Marlborough is one of the DFMs to have gone overweight bonds at the beginning of 2024, a decision that they are perfectly content with.

“At current levels, these bonds offer attractive yields and good risk-adjusted returns,” said Raj Manon, head of multi-asset investments. “We also expect government bonds to benefit from slowing growth and gradual interest rate cuts by the Bank of England.”

In fact, there was a total absence of pessimism across the board – high yield bonds were the only sub-asset class to be viewed in a majority-negative light. 

We’ll be delving into more details over the coming editions, so do stay tuned.