Rothschild Wealth Management is keeping faith with the “real
assets” of gold, commodities, property and equities to provide some inflation
protection at a time when central banks are heading into uncharted territory
with heavy amounts of money printing.

In a regular commentary, Dirk Wiedmann, head of investments,
said that global economic growth will remain “weak” although risk asset prices
should be supported for the rest of this year by low interest rates and
quantitative easing.

He noted that Bank of Japan governor, Haruhiko Kuroda, newly
installed since the national elections of last December, has pledged to
increase inflation to 2 per cent within two years through aggressive monetary
policy and double the monetary base of the economy. This process has already
boosted Japanese share prices and weakened the yen’s exchange rate.

Likes

Rothschild Wealth Management is favourable towards the
following areas in its asset allocation thinking, Wiedmann said:

-- “Leading global businesses”, which he says are fairly
valued and pay solid dividends;

-- Currencies such as the Norwegian krone and Canadian and Singaporean dollars. Wiedmann added that gold can be seen as a global hard currency;

-- Emerging markets;

-- Japanese equities. “This market has been shunned for a
long time but, today, it looks very cheap on valuation measures such as the
price to book ratio. In our view, a weaker yen and negative real interest rates
could trigger a further re-rating of Japanese equities over the next 12 to 18
months,” said Wiedmann;

-- Large technology stocks. The firm argues that such firms
are generating cash, and returns on invested capital are generally in the
double digits. Debt levels are low, valuations are attractive and sales growth
has also been strong, with revenues rising sharply; and

-- “Cheap hedges”. Leading government bonds cannot be relied
on to defend capital in difficult markets. Instead, Rothschild Wealth
Management is using specialist hedge funds, option strategies and precious
metals to defend its portfolios against risks.

Dislikes

Wiedmann said the firm dislikes cash, as returns after
inflation are negative. It is bearish about “high quality” government bonds as
yields are too low to compensate for risk.