Portfolio
Public-private allocation guidance, capital market assumptions, and strategic insight to help investors build forward-looking portfolios they can act on and defend.
The economic outlook continues to deteriorate, geopolitical risks have increased, and every indicator in our recession checklist will flash red by the end of the year. The Fed will keep hiking until monetary policy becomes restrictive. Markets are still too complacent: The risk premium is very low, option prices show no sign of capitulation, and profit estimates remain too optimistic. Emerging markets ex-China equities are starting to look attractive. Not only are they trading at cheap multiples, but their return on equity is at the highest level in decades.
MacroQuant is overweight bonds, underweight equities, and neutral on cash. Within the equity universe, the model is overweight Japan, the US, and the UK, underweight the Euro Area countries and China, and neutral the remaining countries. The sector model favors defensives and Energy over cyclical sectors.
Inflation is sticky, growth slowing, and central banks will stay hawkish. Not all the bad news is priced in. Stay cautious: Underweight equities, overweight government bonds.
