Mastering Market Volatility: Turning Turbulence into Portfolio Opportunity

Key Takeaways from Our Experts:

• Equities for the long haul, but short-term, fixed income shines.
• Market complacency in cyclical sectors amidst looming uncertainty.
• Asset prices reflect news flow, not just recession binary.
• Bonds are back – seize the opportunity in this capital-friendly environment.

In today's fast-paced investment landscape, success hinges on your ability to navigate the dynamic currents of the macroeconomic world. It's a world where 'TINA' (There Is No Alternative) has evolved into 'Terra' (There Are Reasonable Alternatives), and the choices you make can shape your investment outcomes. Recently, during an enlightening Trend Watch webinar, four distinguished experts in allocation and macro strategy – Caroline Simmons, CIO at UBS; Joe Little, CIO at HSBC; Patrick Saner, Head of Macro Strategy at Swiss Re; and Edward Smith, Co-CIO at Rathbones – took centre stage. Together, they discussed the current macroeconomic landscape and its profound impact on asset allocation strategies.

Equities:

• Caroline: Over the next six to 12 months, she is neutral on equities, particularly due to evaluations, especially in the US equities market, which she views as reasonably expensive. She prefers fixed income during this period.

Fixed Income:

• Caroline: Caroline expresses a preference for fixed income over equities, primarily due to attractive valuations and yields, as well as concerns about falling earnings linked to nominal GDP.
• Edward: Edward indicates an overweight position in high-quality fixed income, with a nuanced view on duration, driven by inflation risks and the carry in sharp ratios. He highlights the shift in favour of fixed income in the current environment compared to previous years.
• Patrick: Patrick discusses the attractiveness of fixed income, especially from a yield perspective, noting a significant shift towards bonds in recent years. He suggests that fixed income offers good opportunities for capital deployment.

Asset Allocation and Market Dynamics:

• Joe: Joe emphasizes the importance of market sentiment and consensus in shaping market dynamics. He discusses the prevailing consensus of a soft landing and expresses concerns about whether this trend can last, considering lacklustre earnings and questions about a potential shift in discount rates.
• Patrick: Patrick highlights the challenge of finding diversification in the current investment landscape and suggests that there is an opportunity to find diversification in emerging markets, given the idiosyncratic behaviour of global stock markets.

Emerging Markets:

• Patrick: Patrick mentions an opportunity to find diversification in parts of frontier and emerging markets. He notes that the idiosyncrasy in the behaviour of global stock markets is intriguing and marked, making it necessary to be creative in portfolio construction.

Bringing together top fund selectors for insightful dialogues and allocation strategy discussions, our Fund Forums serve as dynamic hubs of knowledge exchange. If you're an asset manager looking to showcase your fund at our European conferences, we welcome your participation. Let's collaborate in shaping the future of finance – get in touch with us today to explore this exciting opportunity.

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