Equities could be the choice in uncertain era

At the beginning of this month, global equities had surged to all-time​ ​highs as investors​' faith in the US President Trump​'s promises of boom​ ​times remained untrammelled by the lack of detail.

Markets were​ ​confident Congressional approval for big spending and tax cuts will be​ ​given, and trade-offs will be more than compensated for by economic

growth. Indeed, even the US rate increase - the scourge of equities in​ ​times past - is being viewed as an indicator of confidence.

A year ago, this would have appeared whimsical, if not outright​ ​impossible. Indeed, the next 12 months can, and may well, throw up​ ​more surprises that no one sees coming, but will impact portfolios.

These​ ​include post-Trump expectations of US growth falling flat. Or we may see​ ​a breakout year for the Eurozone where unemployment has finally​ ​crossed below 10​ per cent​. And, whilst the prevailing consensus is that Brexit​ ​will take longer, and be tougher, than expected, the pundits could well​ ​be wrong again. Europe has huge incentives to treat the UK well in​ ​negotiations, and many thorny issues may well be resolved this year.

Further afield, China remains stable, unbelievably so. Fears of an​ ​economic implosion rocked markets early last year, but the country​ ​remarkably grew at an annualised rate of 6.7​ per cent​ in 2016, a figure some​ ​keen observers believe dubious. Many experts expect a day of reckoning​ ​to come at some point. It may well be this year.

Pollsters, political prognosticators, financial forecasters and average​ ​punters are often wrong about many of their expectations. Even if they​ ​are right, there is no way to know how markets will react. In 2016, no​ ​one saw Brexit or a Republican clean sweep. Even if they had, rational​ ​investors would have shorted risk-assets, been long safe-havens or held​ ​cash to ride out the ensuring volatility. They would have been wrong.

Equities? Up. US dollar? Stronger. Government bonds? Sold off. Lesson:​ ​Trying to define the future is impossible; it may also be useless.

While we recognise a discomforting backdrop to global markets, equities​ ​are still our most significant allocation. Why? The asset class appears​ ​attractive, not only in comparison to bonds, but also in absolute terms.

Equities offer some value across a number of measures (for example​ ​price-to- book ratio). Moreover, equities continue to be supported by​ ​strong momentum, and bearish sentiment, both strongly supportive​ ​factors in our investment process.

Having said that, we recognise that markets can move with staggering​ ​speed and we continue to have allocations to high quality, investment-grade bonds in spite of record low yields and high valuations. They are​ ​held primarily to diversify away from equity risk, and generate some​ ​income.

As another form of defence, we have held some cash on portfolios in​ ​recent years for two key reasons. First, it gives us a flexible position to​ ​capitalise on attractive investment opportunities, and reduces volatility​ ​from potential risks of all kinds.

Second, it is a core asset class. It may not​ ​generate much in the way of return, but it does not lose nominal value -​ ​the most effective form of protection if and when volatility for risk-assets​ ​increases.

Following the acquisition of Kleinwort Benson by Societe Generale in​ ​summer last year, SGPB Hambros and Kleinwort Benson will be legally​ ​merged in 2017 under the name Kleinwort Hambros.

Led by Chris​ ​Perkins, Kleinwort Hambros, which is based on the Harewood Estate​ ​between Leeds and Harrogate, provides wealth management, fiduciary,​ ​investment and financial services planning services for its clients.

It​ ​believes that Yorkshire will play a central role in the success of the​ ​Northern Powerhouse​.​