Investment Strategy Monthly

Welcome to our new Investment Strategy Monthly. This publication summarises our House View across asset classes. At a time of positive market sentiment and high asset class correlations, putting things into a wider perspective is crucial.

A well-constructed House View is of paramount importance, and we put in place solid foundations for portfolio performance in late 2023. One of our guiding investment principles is that this strategic asset allocation (SAA) framework – part of our House View – delivers the bulk of a portfolio’s returns. Thanks to a focus on core regions and exposures, portfolios have benefited.

The SAA also provides us with parameters for tactical decisions to take account of headline trends. Major stock markets have had an outstanding year to date. Nonetheless, they are fuelled by an investor optimism that we think borders on complacency. Enthusiasm for artificial intelligence (AI) has supercharged some US equities, driving the S&P 500 and Nasdaq to new highs, yet leaving performance extremely concentrated in a few mega-cap names. While the risk of a market reversal is growing, history suggests there is a greater likelihood that lagging stocks will catch up than leading stocks will fall.

Taking a step back, decent economic growth and falling interest rates have produced a moderately healthy economic environment. The monetary policy cycle has already shifted, with first rounds of interest rate cuts in Switzerland, the eurozone, and most other developed markets – and we expect the US to follow suit in September. We have taken the opportunity to lock in bond yields at high levels, and suggest investors continue to do so. Yet unusually, equities and bonds are moving in lock step.

Many investors seem to have dismissed short- and long-term risks, as well as some assets’ high valuations.

This document aims to set out the underlying asset performance drivers and how we work with them. In this way we seek to benefit from rising markets while taking account of, and preparing for, potential shifts. Diversification and a broad-based view of risk and reward are as important as ever. We deliver this through constantly rethinking and refining our House View. Set out in the following pages, this forms the basis of our tactical portfolio decisions, and is designed to balance risks and rewards. It also encompasses a deep pool of opportunities in regional, sector, industry, thematic, and single asset selections, some of which we also explore in these pages.

We hope you enjoy the multi-disciplinary approach of this publication, and look forward to your feedback.

I’m certain the second half of 2024 will be fascinating, in markets and politically, and we will continue to seize investment opportunities while relying on our SAA to deliver core returns across portfolios.

To read more on our views, please download the full publication using the link in the top right-hand side of the screen.