Market liquidity offers increased opportunity in sectors and regions

Global equity markets appear to be in healthier shape.

However, due to heightened valuations and ambitious earnings forecasts, there is more room for negative than positive surprises. Therefore, from a portfolio standpoint, our current preference is to maintain a moderate underweight in equities relative to cash and fixed interest. Our moderately negative view on equities follows our belief earning expectations for 2010 look rather optimistic. Although year-on-year comparisons will be helped by a low base effect, the consensus expectation is for 25% year-on-year profit growth, which represents one of the most bullish forecasts on record. The...