How should investors position for 2013?

We believe the investment backdrop remains structurally difficult.

The clear difficulty is that policymakers seem to want to force their efforts to work through a ‘portfolio balance effect’: pushing the return available on safe assets ever lower and, in so doing, cajoling those investors who wish to achieve higher target returns into buying riskier assets. The authorities continue to hold a strong conviction that unconventional monetary policies will result in a positive wealth effect, i.e., rising wealth will lead to rising consumption and, therefore, economic growth. Not only do we question the efficacy of this policy, we believe that it also creates ...