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  1. Asset Allocation: Private Markets See Less Activity, More Scrutiny

    Bilal Hafeez, Viresh Kanabar

    Private market activity has fallen in H1, with total vehicles closed down over 50%. Investment trusts exposed to the private market are currently trading at wide discounts to their NAV as low liquidity and fears over asset valuations hurt investor sentiment.

  2. Asset Allocation: Fading the ‘Fed Model’

    Bilal Hafeez, Viresh Kanabar

    We reduce our max overweight position in cash as the forward outlook requires a less defensive posture.

  3. Credit Outlook: Investment Grade Is the Better Value Now

    John Tierney

    Credit spreads tightened significantly over the past month as equities continued to rally and the VIX index of equity volatility traded at post-pandemic lows.

  1. Asset Allocation: Stock-Bond Correlation Flips as Growth, Inflation Diverge

    Bilal Hafeez, Viresh Kanabar

    Strategies like the 60/40 portfolio gained in popularity due to the negative correlation between stocks and bonds. However, this is a more recent phenomena as the correlation was positive before the 2000s.

  2. Asset Allocation: Quality Stocks for a Quality Portfolio

    Bilal Hafeez, Viresh Kanabar

    We stay overweight cash and TIPS while maintaining our underweight allocation to equities, long-duration bonds, property, and private equity.

  3. Credit Outlook: We Favour High Yield

    John Tierney

    Investment grade and high yield corporate bond spreads are trading in a narrow range, in line with equity volatility.

New Look Asset Allocation Update

Bilal Hafeez, Viresh Kanabar

This month, we expand the coverage of our asset class views and provide further granularity in each component.

Asset Allocation: Why We Are Underweight Equities

Bilal Hafeez

While many were panicking about a 2008-style bank crisis, we cautioned against such predictions. So far, our view has been right.

  1. The Recovery Is Not Credit Dependent

    Dominique Dwor-Frecaut

    As is typical of most recoveries, the credit impulse is currently negative, suggesting a bank credit crunch may impact growth little.

  2. Cracks Emerging in the US Banking System?

    Sam van de Schootbrugge

    A new National Bureau of Economic Research (NBER) working paper, co-authored by researchers from Stanford and Columbia, analyses the US banking system’s exposure to rising interest rates.

  3. Asset Allocation Update: Cash Is Safe

    Bilal Hafeez

    In 2022, we outlined our ‘everything breaks’ portfolio, which meant constantly overweighting cash above all else.

Credit Outlook – Why Spreads Are Tight and What Will Drive Them Wider

John Tierney

Summary Pundits are again tilting at the frothy high yield credit market, saying spreads are too tight given rising rates and recession risks. They miss obvious fundamental reasons why credit spreads remain tight – default rates are low, and corporate balance sheets are in great shape.

Asset Allocation Update: Turning Overweight Commodities and Neutral Equities

Bilal Hafeez

2023 has started with a positive tone. Most risk markets from equities to crypto are up, and we identify four driving themes:

  1. 2023 Corporate Bond Outlook: It Is Ok to Be Long

    John Tierney

    Corporate bonds spreads will widen significantly if, as we anticipate, persistent inflation leads to higher rates and a recession later this year.

  2. The End (of the Business Cycle) Is Nigh – What Next?

    Richard Jones

    The concept of the business cycle has always fascinated me. And I have always thought understanding it is important for improving investment and trading decisions.

  3. Ep. 119: Marion Laboure on Democratising Finance, Bitcoin as Digital Diamond and Central Bank Digital Currency 

    Bilal Hafeez

    Marion is a senior economist at Deutsche Bank in London and a lecturer at Harvard University. She has extensive private sector, public policy, and monetary policy experience...

Charts of the Week: Fear and the Fed

Matthew Tibble

Markets are mispricing Fed hiking. FX markets are in fear mode. EGB issuance is rising, with Germany’s supply of Bund duration expected to grow most.

Ep. 118: Raymond Sagayam on the Biggest Overlooked Market Risk, Building World Class Teams, and Lessons from Bodybuilding 

Bilal Hafeez

Ray is the Chief Investment Officer of Fixed Income at Pictet Asset Management. He joined Pictet in 2010 as Head of Total Return Fixed Income, before becoming CIO in 2017 and an Equity Partner in 2018.

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