Monthly Asset Allocation Outlook

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5 min read
2025-11-30
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The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.

This is a monthly snapshot of the asset allocation views of Wellington’s Investment Strategy and Solutions Group as of October 2024. It covers global equities, bonds and commodities and complements the more detailed analysis we share in our Quarterly Asset Allocation Outlook.

Key*

1

*Please note that we use a more detailed key in our Quarterly Asset Allocation Outlook.

Equities

Overweight: no change

US

Neutral: no change

Our view on US equities is still neutral. The US economy displays continued resilience, with robust economic growth, strong labour markets and falling inflation. However, valuations at the index level remain rich and the upcoming election represents a near-term risk catalyst. Given these factors, we believe it is preferable for investors to take regional equity risk elsewhere.

Europe

Underweight: down

We still take an underweight view on European equities. Earnings momentum in Europe remains weak and growth expectations are lacklustre. Germany’s sluggish economy and France’s political uncertainty have further clouded the economic outlook. We do not see a compelling near-term catalyst for European equities’ outperformance relative to other regional equity markets.

Japan

Overweight: no change

We maintain our overweight view on Japanese equities. Despite recent market volatility and potential short-term fluctuations, we still see a strong structural case for Japanese equities. Ongoing corporate governance improvements and a shift towards a more inflationary environment represent positive developments for Japanese equity markets. 

Emerging Markets

Underweight: down

We have moved our stance on emerging markets equities from underweight to neutral. This change is primarily driven by an improved outlook on China, following the recent announcements around stimulus. While the government’s commitment can boost the Chinese equity market in the short term, structural headwinds persist. In addition, markets face increased uncertainty around the direction of US-China trade relations ahead of the upcoming US election.

Government bonds

Neutral: no change

US

Neutral: no change

Our neutral view on US rates is unchanged. US Treasury yields rose in the past couple of weeks, as markets began pricing out some expected cuts. With the upcoming elections in focus, we anticipate a higher budget deficit regardless of the outcome, while we still observe the risk of structurally higher inflation. Ultimately, the impact will depend on policy timing and execution. Consequently, we still view a tactical approach to duration positioning as appropriate, particularly given the potential for heightened rates volatility into the end of the year.

Europe

Neutral: no change

We still take a neutral view on European government bonds within the context of a core duration view. Europe’s macro fundamentals continue to deteriorate, with evidence that growth weakness is starting to spread beyond Germany into France, coupled with the looming risk of US tariffs. We view current pricing as reflective of the likely policy path from here.

Japan

Neutral: no change

We maintain a neutral view, given our expectation that the Bank of Japan (BOJ) will remain patient as it looks to normalise policy. Given the recent election results in Japan, political uncertainty might make it harder for the BOJ to hike rates this year and could also result in more fiscal loosening and higher inflation.

Credit spreads

aa-icon-heading-neutral-down

Investment-grade credit

Neutral: no change

We expect spreads to remain range-bound, with limited scope for further tightening. As such, we see little potential for capital gains; hence, our neutral view.

High yield

Neutral: down

We have reduced our overweight view on high yield to neutral. As spreads continued to tighten throughout the month, maintaining these levels will require exceptionally strong technicals from here, suggesting a more balanced risk/reward profile in the near term.

Emerging Markets

Neutral: no change

We maintain our neutral perspective on emerging markets debt (EMD). While we still forecast low growth in emerging markets economies, we now see a lower return differential between different credit assets. We expect the Fed cutting cycle to provide a tailwind for the asset class. With many of the idiosyncratic stories having played out, we believe that EMD is fair value at current prices.

Commodities

Neutral: down

Energy

Neutral: down

We have adjusted our stance on energy markets from overweight to neutral. We anticipate weak oil demand for next year in an oversupplied market. While any further escalation of tensions in the Middle East could act as an upside catalyst, we are comfortable maintaining our neutral view for the time being. 

Gold

Overweight: no change

Our view on gold is still overweight. Upside inflation surprises represent a key risk ahead, especially with the upcoming US elections. With that in mind, we consider gold as an additional inflation hedge and diversifier within multi-asset portfolios. Gold has already significantly outperformed this year but, with real rates falling, we believe it remains a valuable trade moving forward. 

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Disclosure

For professional and institutional investors only. All investing involves risk. Investment markets are subject to economic, regulatory, market sentiment and political risks. All investors should consider the risks that may impact their capital, before investing. The value of your investment may become worth more or less than at the time of the original investment. If the strategies do not perform as expected, if opportunities to implement them do not arise, or if the team does not implement its investment strategies successfully, then a strategy may underperform or experience losses. Past performance is not a reliable indicator of future results and investments can lose value.

This material is prepared for, and authorised for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorised by Wellington Management. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund.

Any views expressed herein are those of the iStrat Multi-Asset Team, are based on available information and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. While any third-party data used is considered reliable, its accuracy is not guaranteed.

This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.

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