Mid-year outlook: diversify and hedge

Bullish:

• $ALTPREMIA - Alternative risk premia strategies are viewed as valuable for providing uncorrelated returns and effective tail risk hedging in portfolios.

  • “We have long believed in alternative risk premia. We think it provides uncorrelated returns to portfolio. It gives you, you know, on the defensive side, proper tail risk hedging.”

    Alexandra·17:16
• $DIVERSIFY - Diversification is seen as a highly effective strategy for asset allocation, particularly in contrast to the challenges of market timing.

  • “There's two value adds that we can bring as asset allocators to the portfolio, either market timing or diversification. And I think diversification has worked really, really well, as you said, but market timing was very tough.”

    Christian·1:19
• $LOWVOL - Low volatility stocks are recommended as a defensive strategy to moderate risk while staying invested, potentially freeing up risk budget for more volatile sectors like tech.

  • “So we've been quite focused, at low volatility. Like low volatility stocks, which is like a defensive strategy can be a very good way to moderate risk while staying invested and essentially also free up risk budget to maybe own some of these more convex but more volatile parts of the market like tech and and the magnificent seven.”

    Christian·10:40
• $USEQUITIES - A positive outlook for US equities is based on expectations of economic cooling without contraction, with improving GDP forecasts and cooling inflation creating a favorable 'Goldilocks' scenario.

  • “Our expectation is that, the economy is going to cool without contracting. And in fact, we've seen actually somewhat of a a Goldilocks scenario recently where you have GDP forecast moving upwards and inflation data coming through much cooler than anyone had anticipated.”

    Alexandra·6:40
• $TECH - Highly valued, highly profitable tech companies, particularly the 'Magnificent Seven', are seen as potentially attractive due to improving Return on Equity (ROE) metrics supporting their current valuations.

  • “And every month this year, the ROE has actually ticked up on the S and P 500. And that supports, especially for these highly valued, highly profitable companies, the current valuations. And as long as they keep that momentum, I think that that can be parts of the opportunity.”

    Christian·9:48
• $EUBANKS - European banks are viewed positively due to increasing profitability, ongoing restructuring, and consolidation, following a period of challenges from negative rates and poor growth.

  • “European banks have been very badly hit by negative rates. We have been very badly hit by the last cycle of of deleveraging and and and relatively poor growth in Europe, but but they are now actually looking better. They have been increasing profitability. There is restructuring. There is consolidation.”

    Christian·15:20
• $GLD - Gold is considered as a potential alternative safe-haven asset, offering negative correlation with the dollar and uncorrelated performance during risk-off periods.

  • “So that means that you need to find alternative safety, which might include assets like gold, that have been negatively correlated with the dollar, but also in risk off have been uncorrelated.”

    Christian·19:20
• $COMCARRY - Commodity carry strategies are viewed as interesting diversifiers that have performed reasonably well, depending on their construction.

  • “We've seen a lot of focus on commodity carry as a good example that has actually performed reasonably well this year, depending on the construction, but but it has been interesting as a diversifier.”

    Christian·20:50