Because the risk premium (‘spread’) on investment‑grade corporate bonds has fallen sharply, while emerging‑market bonds still offer attractive spreads, we are reducing the weighting of investment‑grade corporate bonds from neutral to underweight. Offsetting this, we are increasing the weighting of emerging‑market bonds to a bigger overweight.
Within equities we have reduced our allocation to the communication services sector in favour of the industrials sector. Communication services is a highly diverse sector, encompassing both defensive telecom companies and growth stocks such as Meta and Alphabet. The latter carries a heavy weight in the sector index, and after the strong rally — Alphabet’s share price has risen by nearly 110% since 8 April last year — we believe this is a good moment to take profits. In addition, profit growth expectations for the sector this year are well below the market average. The industrials sector stands to benefit from several structural growth trends, including the construction of AI data centres, electrification, rising infrastructure investment and higher defence spending. As a result, earnings growth expectations for the sector look solid.
"}},{"componentType":"sectionTitle","title":"We have implemented these changes"},{"componentType":"paragraph","richBody":{"value":"Sold positions:
iShares S&P 500 Communication Sector UCITS ETF
Reduced positions:
Alphabet, Deutsche Telekom, Meta Platforms, Walt Disney, Siemens; all positions in investment‑grade corporate bonds have been reduced on a pro‑rata basis.
Increased positions:
Amundi Emerging Markets Local Currency Bond, Neuberger Berman Emerging Market Debt Hard Currency
New positions opened:
SPDR S&P U.S. Industrials Select Sector UCITS ETF, Eaton, Rheinmetall, Siemens Energy
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