Fidelity asset allocation director Trevor Greetham has started to cut back on his commodity exposure in light of slowing growth expectations from China.
Greetham, who manages Fidelity’s multi-asset funds and oversees the group’s asset allocation process, is moving to “a slightly more defensive position” amid signs that global growth is cooling off.
In his latest update, he says: “This is a very bullish environment for stocks but at the margin it appears that growth is cooling off a little. In commodities and commodity-sensitive markets, we are starting to reduce.”
Greetham adds that one of the issues he is most cautious about is the growth prospects of China, where the authorities have been taking steps to reduce unsustainable expansion in the economy.
He says: “That suggests to us that we could see some weakness in the commodity markets and in the emerging markets as the world economy as whole softens slightly over the summer.”
According to the latest Bank of America Merrill Lynch fund manager survey, a net 29 per cent of asset allocators were underweight commodities in May, which is the lowest weighting to the asset class since December 2008.
The shift comes after mounting concerns that the world’s second largest economy is heading for a so-called hard landing. A Chinese hard landing and commodity price collapse is now the second most feared tail-risk, being cited by one-quarter of fund managers.
Greetham is currently overweight US and Japanese equities, owing to the strength of the US economy and the recent monetary and fiscal loosening recently unleashed in Japan.