Top three takeaways
Build dynamic portfolios and maintain a growth mindset
While our positioning is defensive as we enter 2023, we maintain a growth mindset and expect to pivot as a sequence of potential opportunities unfolds.
The equity bear market is incomplete: a new bull market has never begun before a recession has even started.
Near-term, we emphasize quality, such as short-term US dollar investment grade fixed income – see putting cash to work.
Likewise, we favor more defensive equities, including dividend growers. For suitable investors, capital markets and alternative strategies also offer potential opportunities to put cash to work.
As interest rates peak, we expect to shift first to quality, growth equities in non-cyclical industries; cyclicals later on. Once dollar strength reverses, we see deep value potential in various non-US assets and currencies, such income-producing real estate.
Our strategic asset allocation methodology points to 10-year annualized returns of 10% for global equities, 5.1% for global fixed income and 3.4% for cash.
Put cash to work in a higher rate environment
Rising rates and volatile markets unsettled investors in 2022. The new higher rate environment creates potential opportunities to seek income across asset classes. Difficult market conditions in 2022 increased the temptation to sit on excess cash.
Sitting on excess cash is a risky strategy, which almost always leads to missing out on recoveries. We believe 2022’s turmoil has created more viable opportunities for putting cash to work.
Our expectation is for interest rates to peak and inflation to fade over time. The possibilities for seeking yield do not include money market strategies.
We favor various short- and intermediate-term US dollar denominated bonds. We also like dividend grower equities from resilient industries. Suitable investors may consider select alternative and capital markets strategies.
Seek exposure to unstoppable trends, which drive long-term economic growth
Unstoppable trends are long-term phenomena that are transforming how we live and do business. We seek portfolio exposure to these powerful forces.
The US-China technology trade war increases the challenges facing investors. But it also creates portfolio diversification potential
Fossil fuel energy dependence threatens economic growth and national security. We believe this strengthens the case for the clean energy transition and for positioning portfolios accordingly
We highlight a range of attractive areas including semiconductors and robotics & automation, accessible via both public market and alternative strategies
Aging populations and the expanding global middle class will likely boost healthcare demand long-term. Among our favored areas are biologics, life science tools, value-based care and agetech