Cutting back on an overweight to UK small and mid caps and increasing exposure to credit are some of the ways Kingswood's Rupert Thompson and Dave Winckler are positioning portfolios as we "near the bottom" of the global coronavirus pandemic.
CIO Thompson said they are "a little more cautious than average".
"Firstly this is because of the size of the bounceback we have seen in stockmarkets. Yes, the sell-off was equally as unprecedented, but it is slightly crazy the US market is back up to where it was six months ago," he explained.
"Secondly, there is an awful lot of uncertainty. Markets seem to be pricing in a V-shaped recovery within a year, which to us looks rather improbable - but we are not massively bearish."
The team has therefore trimmed its overweight to UK small and mid caps, said Winckler.
The associate director of investment strategy pointed out that many investors - including themselves - held overweights to the market area at the start of the year because they anticipated a "Boris bounceback".
"Clearly, the investment case for UK small and mid caps is less strong than it was before. Having said that, valuations are on the cheap side so we still want to keep some of that overweight," he explained.
"Meanwhile, we still have the next Brexit deadline on 31 December, which the UK Government is refusing to extend."
As such, Kingswood has adopted a "barbell approach" to holding UK equities. Thompson pointed out that UK small and mid caps usually outperform during a recovery, but he expects this recovery to be "sluggish".
The team has therefore also allocated to large-cap secular growth companies.
"There is no denying quality growth stocks have had a very good run in the last couple of years," he added. "Valuations are verging on expensive, but the environment is going to remain very positive for them for the time being."
The team currently uses a combination of Threadneedle UK, Allianz UK Opportunities, Merian UK Mid Cap and a FTSE 100 tracker to achieve this positioning.
Within fixed income, Winckler said credit spreads are attractively valued compared to where they were a year ago - unlike most equity markets.
"Credit spreads have narrowed significantly, partly because people are taking a more optimistic view, but partly because central banks are buying corporate bonds everywhere - that makes a massive difference," he reasoned.
Kingswood uses strategic bond funds for its fixed income allocation, all of which have "naturally been moving towards investment-grade credit" over recent months, according to Winckler.
These include Janus Henderson Strategic Bond, Artemis Strategic Bond and BNY Mellon Global Dynamic Bond.
"You could say credit at these levels probably looks better value than equities on a one-year view, particularly if you get equity markets falling back. Is there more upside to equities than credit? Yes there is," Winckler added.
"It is not easy at the moment to choose between equities and credit. The one thing everyone is in agreement about is government bonds look poor value. The chance of yields falling any further is pretty limited."