November Market and Economic Update

• Our long-term view is largely unchanged, and we continue to believe our more cautious outlook remains rational.
• The excess liquidity that has driven investor behaviour further along the risk spectrum is dwindling, and while the interdependence of Federal Reserve monetary policy and asset prices is unclear, the end of Quantitative Easing (QE) and a possible increase in US interest rates will have an impact on all asset prices.
• If the US recovery remains sustainable, we expect the US dollar to continue to strengthen over the next few years, due to further weakness in US dollar trading partners and the end of QE.
• We have made a slight reduction in our allocation to equities. Within equities, we have reduced our exposure to Asia Pacific and emerging markets, and partially re-allocated this into Japanese equities. Our preference is for Japanese yen exposure to be hedged.
• We have increased our exposure to fixed income, particularly sovereign debt, and to a lesser extent investment grade corporate credit.
• Finally, we have zero-weighted our allocation to commodities.

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