Global Asset Allocation: The View From the UK

Broadening earnings momentum, resilient growth and AI investment support a modest equity overweight, but high valuations, inflation and fiscal risks justify selective positioning.

• Around 78% of S&P 500 companies beat earnings estimates in the latest season, while 2027 earnings expectations imply 17% growth and continued upward revisions.
• Emerging markets are preferred at roughly 10.1x forward earnings versus 15.4x for developed markets, with infrastructure, manufacturing, energy security and digital-capacity investment broadening the growth drivers beyond technology.
• A weaker US dollar could support emerging-market capital flows, although technology concentration, cyclical risks and elevated energy prices remain important vulnerabilities.
• Government bonds are underweighted, including UK gilts, US Treasuries and European bonds, because resilient growth, inflation uncertainty and fiscal pressures are expected to keep longer-term yields elevated.
• High yield and emerging-market local-currency debt remain favoured within fixed income because of healthy fundamentals, attractive income and, for local-currency debt, the potential benefit of an eventual softer dollar.

Takeaway: The recommended stance is modestly overweight equities, with preferences for US growth and small caps, the UK, Japan and emerging markets, while investors should remain cautious on duration and account for geopolitical escalation, commodity volatility, persistent inflation and weaker labour markets.