Is Your Investment Strategy Working This Year?
by Arun Kaul, CIO of Boutique CIO
This economic cycle is very different. Investment Strategists need to ignore many of the strategies that worked in the past cycle.
• Inflation is at its highest level since the early 1980s.
• Cash has returned as an asset class as yields on U.S. Treasuries are at the highest levels since 2005-2007 and forecast to go higher during Q4.
• Bond yields have risen dramatically since post Covid lows and are at the highest levels since 2011.
Portfolio Managers need to deploy a different set of tools to successfully navigate current markets. Going forward, investors should review their portfolios for the following:
Higher than usual cash levels
Fixed income bonds with short term to short/medium term duration.
Hedging index/sector exposures to better manage risk and provide downside protection.
Truly ‘active’ philosophy towards security selection as passive strategies will be at a disadvantage in this environment.
Incorporation of thematic exposures that capture macro trends. Current macro trends around war, production shortages, inflation and mercantilist policies will exert more influence on asset prices that past cycles.
We expect turbulent markets heading into early November with investor focus on inflation abatement, congressional balance of power and rising rates. While the long term focus is always important, ignoring the short term is never prudent.
Sparta Wealth Partners is a registered name for J. Alden Associates, Inc and Total Solutions Enterprise LLC. Asset management services offered through Total Solutions Enterprise LLC. Member FINRA / SIPC. Performance data is as at close September 15, 2022.