Barclays Wealth Advises Remaining Overweight Equities

NEW YORK, April 7 /PRNewswire/ -- Barclays Wealth 'Compass' investment calls for April include:

• Remain overweight equities; favor developed-market equities

• Consider equity long/short managers as part of an equity strategy

• For emerging market equities, buy single-country ETFs for Brazil, China, India, Korea, Mexico, Russia, South Africa and Taiwan

Recommendations

Continue to favor stocks, particularly those of developed economies

Even after the rally of equity markets in 2009 and so far in 2010, equity market valuations continue to look inexpensive.  Moreover, investors' appetite for risk seems to be returning, as suggested by outflows from "safe haven" money market funds in the US.  These outflows are likely to continue given that $3 trillion remains in such funds, a figure well above both the pre-crisis norm and the previous peak level in 2002.  Finally, companies and households are generating free cashflow on a scale not seen in the past 30 years.

We recommend equities from developed markets, particularly the UK.  Corporate profits are expected to grow just as quickly as those in emerging markets this year, while emerging market economies are expected to see monetary policy tighten prior to and more than in developed economies.

Consider long/short managers for equities

In a more normal environment for equities – as opposed to the record returns in 2009 – active equity long/short management can offer outperformance.  This is particularly true when intra-market equity valuations vary significantly.  Currently, intra-market equity valuation dispersion is at its highest level since 2004.  Investors should consider shifting a portion of their equity portfolio to high-quality equity long/short managers.

Create an equal-weighted emerging markets equities portfolio: Buy single-country ETFs for Brazil, China, India, Korea, Mexico, Russia, South Africa and Taiwan

Although we recommend concentrating equity exposure on developed markets, investors should consider at least a small allocation to emerging market equities in their portfolio because: (1) they exhibit lower correlation to US equities than other developed market equities; and (2) over three-, five- and 10-year horizons, they've offered superior risk-adjusted returns.  Consider creating an equal-weighted portfolio of eight single-country ETFs: Brazil, China, India, Korea, Mexico, Russia, South Africa and Taiwan.  These are the eight largest equity markets in the 22-country MSCI Emerging Markets Index.

Exposure to the currencies of these emerging market countries may be an additional benefit. Barclays Wealth has been recommending holding emerging market currencies against developed currencies since last year.

Aaron S. Gurwitz, Head of Global Investment Strategy at Barclays Wealth, said:

"Position portfolios to continue to benefit from the most likely outcome: a benign environment of stable growth, subdued inflation, accommodative central bank policy and robust corporate profitability."

Kevin Gardiner, Head of Investment Strategy, Europe, Middle East & Africa, at Barclays Wealth, said:

"Equity valuations remain undemanding, and investors' risk appetite appears to be returning. We think equities are likely to remain the best-performing of the traditional asset classes.  However, the gains are expected to fall short of those in 2009, so the importance of active management is correspondingly higher this year."

Michael Crook, Alternatives Strategist, Americas, said:

"The current market environment, which is characterized by wide intra-market value dispersion – highest dispersion in six years – is ideal for equity long/short managers."

About Barclays Wealth

Barclays Wealth is a leading global wealth manager, and the UK's largest, with total client assets of $241 (pounds Sterling 151.2bn) as of 31 December 2009. With offices in over 20 countries, Barclays Wealth focuses on private and intermediary clients worldwide, providing international and private banking, investment management, fiduciary services, and brokerage.

Barclays Group is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services with an extensive international presence in Europe, the Americas, Africa and Asia.

For further information about Barclays Wealth, please visit our website www.barclayswealthamericas.com.

Twitter page: www.twitter.com/barclayswealth

Barclays Wealth is the wealth management division of Barclays Bank PLC, functioning through Barclays Capital Inc. in the United States. Barclays Capital Inc., an affiliate of Barclays Bank PLC, is a U.S. registered broker-dealer and regulated by the Securities & Exchange Commission. Member SIPC.

SOURCE Barclays Wealth