Multi-Asset – Challenges and opportunities
We have passed through the valley of tears in 2023, with the hope that it can become a place of springs. This does not mean that the coming year will be less challenging in terms of events, but we are optimistic that we can overcome any obstacles.. We will keep calm and carry on.
Bonds: Balancing duration
The bond markets have experienced more volatility than the equity markets. This is certainly due to the repositioning and shift in investors’ preferences after decades of favouring stocks over bonds. The central banks were slow to respond to the rising inflation rates, and they will probably act similarly in the countermovement. For this reason, we favour a strategy that balances the duration of bonds with a tilt towards corporate bonds.
Equities: A boost for the earnings outlook
We believe that the US dollar will lose its appeal as the interest rate gap with the European and Swiss currencies narrows and the US government debt skyrockets. This will benefit all economies that depend on imported energy. As a result, inflation rates will ease and wage pressures will subside, which we think will definitely boost the earnings outlook for companies. With strong demand for goods and services, we foresee higher profits.
The traditional asset classes of equities and bonds have regained their attractiveness, after a long period of underperformance. This, we think, will discourage investors from seeking other asset classes unless they have a comparable risk/return profile. However, in our view diversification by spreading your investments across a variety of asset classes is always an advantage.
Our model indicators suggest three main strategies:
- Reducing the exposure to government bonds
- Increasing the exposure to equities
- Avoiding real estate investments from a global perspective.
The information contained herein is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained herein may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information contained herein. Past performance is no indicator of current or future trends. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice or an invitation to invest in any GAM product or strategy. Reference to a security is not a recommendation to buy or sell that security. The securities listed were selected from the universe of securities covered by the portfolio managers to assist the reader in better understanding the themes presented. The securities included are not necessarily held by any portfolio nor represent any recommendations by the portfolio managers nor a guarantee that objectives will be realized.
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