Brown Shipley has sold some of its US equities to further reduce its US dollar exposure, as it believes the currency is overvalued and likely to weaken, the private bank has revealed.

It has reallocated to emerging markets and low-volatility developed market equities, arguing that emerging markets offered compelling valuations and strong diversification benefits, and low-volatility equities had historically outperformed in downturns.

Brown Shipley has also reduced its exposure to broad US equities and Treasuries amid the “growing burden” of the US’s fiscal and trade deficits.

“One of our most significant recent moves has been increasing exposure to Japanese equities, which offer attractive valuations and strong diversification potential,” stated Quintet Private Bank, parent of Brown Shipley, chief investment officer, Daniele Antonucci.

Inflation is gaining traction in Japan following years of deflation, which has resulted in its national bank being the only major central bank currently increasing interest rates.

“This policy divergence supports the yen, which we view as undervalued,” Antonucci said.

“A stronger yen could enhance euro-based returns, while moderate appreciation should not impact Japan’s export competitiveness.”

Looking at fixed income, the private bank has moved from underweight to neutral on high-yield bonds and continues to be underweight on US investment-grade bonds due to fiscal concerns that could negatively impact Treasuries.

Brown Shipley highlighted the importance of diversification amid the ongoing uncertainty and volatility, and it is aiming to balance growth assets with defensive ones, pairing equities with short-dated European sovereign bonds and high-yield credit with high-quality European corporate debt.

The private bank remains moderately overweight in equities amid hopes that a lasting US-China trade deal or European fiscal stimulus could lift risk assets.

“The stagflationary trend that defined the first half of the year – slower growth and higher prices – has not fully faded,” Antonucci said.

“A key question is whether the stimulus generated by tax cuts and increased spending will offset market concerns about the size and trajectory of US government debt.

“In investing, waiting for perfect clarity means missing opportunities. You never reach final conclusions – only points of action.

“That is why we stay alert and ready to act. In today’s market, it is preparation, not reaction, that drives performance.”

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