Barclays

Barclays Wealth Compass for June 2010 recommends methods to protect portfolios against downside risk

Barclays Wealth 'Compass' investment calls for June include:

• Tactical Asset allocation - Equities Still Favoured on a six-month view
• Long Swedish Krona, short Euro

Aaron S. Gurwitz, Head of Global Investment Strategy at Barclays Wealth, said: "A benign market scenario still looks more likely than a bad outcome. But the upside and downside risks now look more equally balanced than they had appeared. We reiterate our belief that investors should hold a full complement of risk assets, and that all portfolios should contain some investments that will do well if the recovery falters. In this month's Compass we consider a range of ways to protect portfolios against downside risk in this higher volatility, low interest rate environment"

Tactical Asset allocation - Stay Overweight Equities

Our central view remains one in which the global economy continues to recover, with corporate profits leading the way: the overweight position in equities is smaller than it was, but stocks remain our preferred core asset class. We suggest that investors should not to rush into selling equity portfolios and remain invested. Equity markets look to offer long-term value at these levels, but in the very short term, it may be a good idea to take a step back and wait for things to calm down.

Kevin Gardiner, Head of Investment Strategy, Europe, Middle East & Africa, at Barclays Wealth, said: "In early May we reduced the equity overweight in our model portfolios. On a six-month view we still expect global equities to outperform other assets - particularly cash. However we would wait for volatility to subside before committing new funds and would urge that investors retain a full weighting in high-quality long- duration government bonds to provide some protection if growth falters."

Long SEK, short EUR

We expect that a slow and halting recovery in the euro area and continuing concerns about the region's long-term structural challenges will cause the euro to remain under downward pressure. We prefer selling the euro against a number of other European currencies. Currently, our favourite is the Swedish krona (SEK). Sweden is likely to grow faster than the euro area, the currency looks undervalued and the government’s deficit and debt ratios are relatively well-behaved.

Michael Sneyd, FX Economist, commented: "we expect that Sweden's growth outlook will support the krona. Although the Swedish economy suffered a severe recession, in part due to a sharp fall in investment spending, we expect it to grow more strongly than the euro area this year. We see the Riksbank to start raising interest rates in the second half of the year."

For further information contact:

UK

Lucy Davidson
+44 (0) 20 7114 8947
Will Bowen
+44 (0) 20 7114 8434

US

Monique Wise
+1 212 526 3568
Tiffany Alcorn
+1 212 526 7992

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