Monthly Asset Allocation Outlook

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4 min read
2026-02-28
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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 Wellington’s Investment Strategy & Solutions Group’s asset allocation views as of January 2025. 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: down

With a lot of positive expectations already priced in on US equities, we have moved to a neutral stance. Despite positive momentum and structural tailwinds like deregulation, high valuations remain a constraint. We recognise the risks of a potential correction on the back of higher yields or disappointing news on growth or earnings.

Europe

Underweight: down

We shifted our underweight view on Europe to neutral. The outlook remains uncertain given the lack of growth acceleration, potential tariffs and the index’s out-of-favour sector composition. However, the absence of major political upheavals in France and promising talks about potential reduction in corporate tax rates in Germany make us less negative on European equities.

Japan

Neutral: no change

Our perspective on the prospects for Japanese equities is unchanged. We are optimistic on the region given expectations of recovery in growth, decent earnings-per-share growth and positive drivers such as interest rate normalisation, improved domestic consumption and corporate reforms. However, given the absence of a clear short-term catalyst for outperformance, we are comfortable in keeping our neutral stance unchanged.

Emerging Markets

Neutral: no change

We still take a neutral position on emerging markets (EM) equities, with no significant changes from last month. While we acknowledge the potential for positive surprises from China, our overall stance remains cautious. The tariff policies of the new US administration are likely to induce significant volatility in EM assets over the coming months, presenting opportunities for tactical asset allocation.

Government bonds

Neutral: no change

US

Underweight: down

We maintain our underweight view on US rates due to expectations of stable growth, a strong labour market and more persistent inflation in the coming months. The uncertainty surrounding Trump's policies adds to concerns about potential upside risks to US rates, reinforcing our underweight position.

Europe

Overweight: no change

We are still comfortable with our overweight view on European rates. Growth and inflation indicators in Europe suggest further slowing with elevated risk from US trade policy. The European Central Bank is indeed becoming less reluctant to cut rates, unlike the US Federal Reserve. This divergence supports our overweight view on European rates.

Japan

Neutral: no change

We still have a neutral view on Japanese rates. Recent commentary from the Bank of Japan indicates a more hawkish stance on the hiking cycle, supported by positive signals from recent wage data. However, the pace and extent of the tightening remain somewhat uncertain, which makes us comfortable maintaining a neutral stance.

Credit spreads

Neutral: no change

Investment-grade credit

Neutral: no change

We remain neutral on investment grade credit, expecting spreads to stay range-bound in 2025 with no clear catalyst for widening from current tight levels. From a credit allocation perspective, we monitor spread volatility for opportunities to upgrade our view at better levels.

High yield

Neutral: no change

We still have a neutral view on high yield credit, after having favoured an overweight for most of last year. While we might see further marginal tightening, we prefer to maintaint a cautious stance. From a multi-asset point of view, we believe the upside potential of the asset class compared to equities is more limited at current levels.

Emerging Markets

Neutral: no change

We maintain our neutral stance on EM debt. Despite a reasonably favourable macroeconomic backdrop, downside risks in the region are looming. Tariff decisions, a strong dollar and ongoing geopolitical uncertainties create a challenging environment for both EM fundamentals and demand, informing our neutral view.

Commodities

aa-icon-heading-neutral-down

Energy

Underweight: down

We have adopted an underweight position in energy markets, driven by a tactical underweight view on oil. The team continues to monitor the dynamics at play, including potential US sanctions on Russian oil, OPEC+’s supportive extension of supply cuts and developments in the Ukraine war.

Gold

Overweight: no change

Our view on gold is still overweight as persistent strong structural demand forces create a supportive environment for gold prices. In addition, increasing geopolitical and inflation risks continue to reinforce gold's status as a safe-haven asset.

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These asset allocation views are produced by Wellington’s Investment Strategy & Solutions group, which provides client-centred investment solutions, research and advice ranging from whole portfolio solutions to bespoke single asset class and advisory partnerships. Our solutions platform incorporates expertise across multi-asset, fundamental factor investing and thematic approaches to deliver across a range of client outcomes and objectives. If you wish to discuss your investment challenges, and how Wellington Solutions can help, please contact your Wellington relationship manager or #solutions@wellington.com.

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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