A turning point for the US business cycle is gradually coming into view, says Citi Private Bank, with mid-2017 shaping as a "plausible centre-point".
In its 2016 outlook report titled Late-cycle investing, Citi Private Bank global head of investments Eduardo Martinez Campos said the global business cycle, driven by the US, is in its "later stages".
However, there will be not be "another global downturn" in 2016, Mr Martinez Campos said – adding that the challenge for investors is to pursue late-cycle investment opportunities while at the same time preparing portfolios for "tougher times ahead".
"Although we see near-term potential upside in certain equity markets, particularly in the developed world, we expect to continue to reduce our tactical allocation to equities during 2016," he said.
In a chapter titled Enduring through economic and investment cycles, Citi Private Bank global chief investment strategist Steven Wieting said the turning-point of the current global expansion is "coming into view".
"As such, the balance between reward and risk is slowly tipping less favourably for investors," Mr Wieting said.
"We have been gradually reducing ouroverweight to risky assets since late 2014 for reasons related to the larger business cycle."
Throughout 2016, he added, Citi Private Investors will continue gradually shifting its tactical allocation towards assets with low correlations to equities and a "history of positive returns during equity corrections".
"The current environment offers a narrower choice of investments that, given their current valuations, could potentially outperform in a period of financial stress," he added.
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