We are increasing our equity weight to plus 3 percentage points, at the expense of government bonds. The 3 percentage points will be allocated to Emerging Market equities. We are thus recommending an overall EM equity weight of 6 percentage points above benchmark, funded by a 3 percentage point (market-cap weighted) underweight in global equities and a 3 percentage point underweight in government bonds.
The major risk to this allocation is a continued rise in global energy and food prices, but to put it very clearly - we expect oil prices to stay flat or fall over the coming quarters.
Read more in our monthly TAA publication (June 2008) (PDF: 360kb. 4 pages)