F&C's Burdett: What is driving my key asset allocation calls

ON ASSET ALLOCATION

F&C's co-head of multi-manager Rob Burdett explains how financial markets have become detached from economics, and what this means for his asset allocation decisions.

We are clearly now in a softer patch of economic data and the current round of first quarter earnings is bringing mixed results. All the same, equity markets are holding up well and it is clear that the abundant liquidity provided by central banks is providing support. Research by Gluskin Sheff has shown that the S&P 500 index has an 86% correlation with expansion in the Federal Reserve balance sheet – and the Fed is currently printing $85bn a month or 7% of GDP annually. Add to this Japan’s quantitative easing programme, which is coming in at 15% of annual GDP, alongside expectations...