Asset Allocator's man loitering near the canapes caught up with Ben Gutteridge and found the director of Invesco's MPS offering determined not to get carried away by the air of optimism which has engulfed markets in 2023.

Gutteridge estimates the re-opening of the Chinese economy will lead to increased consumption in that economy and may boost European economies somewhat, but overall he feels the significance for the world and it's equity markets may "disappoint relative to lofty expectations."

He does see some good news, such as the apparent peaking of US inflation, but the best he can say about the prospects for equities is that when a market widely anticipates a recession, as it does now, the impact of an actual recession on equity markets could be moderate, at least compared to a scenario where a recession happens unexpectedly. 

He adds: "The recession may not be so severe either given the apparent absence of major economic imbalances ie banks, corporations and households don't (in aggregate) appear to be shouldering quite so much leverage as in past, more devastating recessions."

Instead Gutteridge is looking to the bond market, attracted by what he calls the "more defensive return profile in the face of less encouraging growth outcomes, particularly given the increase levels in yield observed through 2022." 

His enthusiasm stretches to alternative assets, which he views as being capable of providing diversification in portfolios right now.

Our database shows Invesco's balanced portfolio had 47 per cent in equities at the end of December, compared with an average exposure of 55 per cent for the peer group, while the fixed income allocation is 39 per cent, compared with 26 per cent for the peer group average.