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London: Generali Investments is telling its clients to consider using current market strength as a short term opportunity to take profits and reduce exposure to risky assets because the financial crisis is unlikely to be over.
The Italian-owned investor, part of the Generali Group, has shifted for at least a month to an underweight position in equities and cash from a previous overweight allocation. It has also moved its bond holdings to overweight.
"Expecting the bear market rally to cease within the next month, we assume a rising demand in the fixed income area," it said in its May outlook.
April was the best month for world equities since May 2003 with MSCI's main world stock index gaining 5.31 per cent. Government bond yields, meanwhile, rose during the month as safe-haven bets were unwound.
Investors have generally regained confidence as the Federal Reserve and other central banks have moved to pump liquidity into the credit-hit financial system.
Generali Investments, however, reckons this could be short-lived. "In the past, financial crises have lasted three years on average. The current one - the strongest in post-war history according to [former Fed Chairman Alan] Greenspan - has lasted barely one year. So markets should still be at risk," it told clients.
In addition, the firm is relatively gloomy about prospects for world growth. It believes the US economy is already in recession and, while it expects only a shallow one, sees risks on the downside.
"We [also] strongly believe that the global economy will not remain unscathed from US recession," it said.
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