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Emerging sector running out of steam

Schroders believes that recent strong performance in emerging markets equities may be about to run out of steam.

The firm has been overweight in emerging market equities which have benefited from a weak dollar. But, without further spurs to the sector, it says the market may slow down.

Schroders is also overweight in Japanese equities because of what it describes as reasonable valuations and relative good profit prospects. Relative to the broader market, it believes many good-quality Japanese firms are on attractive valuations.

Recent strength in the US economy, combined with a reassessment of the outlook for consumer spending, has led to an upgrade in US GDP forecasts at Schroders.

The firm is underweight in US equities and is overweight in UK equities. It has also reduced a modest overweight position in Europe excluding the UK.

The Schroders’ asset allocation policy says: “Within equity markets, continental Europe is particularly vulnerable and we have moved from a modest overweight position to neutral here.”

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