Asset Allocation | Portfolio Updates
Asset Allocation Update: Recession Portfolio
- By Bilal Hafeez
- 3 min read
Due to popular demand, we are producing a monthly update on our asset allocation views. In our previous report, we outlined our defensive posture of underweight bonds and equities and overweight cash, commodities and crypto. We continue to hold this view. The basis of this view is:
- The Fed will hike even if it means slower US growth.
- We think the odds of a recession are high due to the global energy shock, Fed hikes, falling US real earnings and negative fiscal impulse.
- European growth will be weak on the fall-out from the Russia-Ukraine war, while China’s zero COVID strategy is constraining Chinese domestic demand.
- A structural imbalance in commodity markets will keep commodity prices elevated.
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
“Within US, we like to be overweight homebuilders” – have you written on this one recently ? To me this looks completely at odds with what’s going on the mortgage /affordability front on the one hand and the input costs in building mat on the other hand. most of these names have been reinforced post- pandemic and have enjoyed strong demand over the last 1.5 years – but this tide is turning.
I think it has been clear US Equities are in a clear bear market, with no end in sight. My issue with crypto is that they trade like a 3 beta tech stock. People say it is correlated with the NASDAQ but to go even further it looks to have an inverse correlation to equity volatility. In other words, VIX up, BTC down. So it seems odd to hold an underweight equity portfolio but be overweight on crypto. I realize you guys are comparing returns in March but it is more apparent on a longer term scale.
However, totally agree with the commodity plays.