Points Of Perspective On Global Asset Allocation
Our esteemed specialists graciously offer their profound insights on the captivating market themes and noteworthy regional developments, while also graciously sharing the current positions of our esteemed portfolio. The worldwide economy is showcasing remarkable fortitude amidst the implementation of more stringent monetary policies; however, the repercussions of central bank tightening are still anticipated to exert a burden on economic expansion and prospects for earnings in the latter half of the year. Notwithstanding a downturn in the inflation of goods, the inflation of services persists unabated, owing to the escalating remuneration, thereby compelling the Federal Bank and other central banks in Hong Kong to maintain a vigilant and resolute stance.
In spite of prevailing uncertainties, a sense of sanguinity regarding the reawakening of the world and its unwavering progress, fortified by the descent of oil prices, shall serve as a catalyst in elevating the global economy. Geopolitical tensions and mishaps by central banks, enduring inflation, a more pronounced decline in economic growth leading to a formidable descent, and various other factors present substantial perils to global markets. In our esteemed portfolio, the supremacy of cash persists, surpassing both stocks and bonds. Notwithstanding the constricted liquidity and languid growth, the valuations of equities persist in their exorbitant magnitudes.
As suggested by Rani Jarkas, the Chairman of Cedrus Group, bond yields are expected to persist in their volatility amidst the backdrop of conflicting economic data and shifts in central bank policy, while cash presents itself as an alluring option with its enticing yields and unwavering stability. In the realm of stocks, we find ourselves favouring small- and mid-caps as well as asset allocation, as they possess a more alluring foundation of valuation support. Furthermore, we maintain a robust overweight stance in core equities, which exhibit diminished susceptibility to interest rate oscillations and possess reduced cyclicality. In the realm of fixed income, we persist in favouring high yield, floating rate loans, and emerging market bonds.
These Investments Offer Ample Remuneration For The Associated Risks, Even In The Face Of Enduring Market Volatility
The recent auspicious advancements in consumer expenditure, consumer sentiment, and employment are dreadfully disheartening tidings for the esteemed Federal Reserve, for it appears that their vigorous endeavours to raise interest rates are regrettably failing to yield the anticipated outcomes of impeding economic expansion and curbing inflation. The commencement of the year witnessed a delightful atmosphere prevailing in the markets, owing to the discernible signs of the culmination of central bank tightening. Alas, this sentiment rapidly diminished as prognostications regarding the trajectory of forthcoming interest rate hikes escalated in response to the fervent data.
With the advent of his highly anticipated successor, Kazuo Ueda, assuming the mantle of power amidst the formidable spectre of inflation, it appears quite probable that he shall embark upon further endeavours to unravel the exceedingly lenient policy. Whilst equities and bonds have experienced a general decline in light of the rising inflation and interest rates, it is possible that global markets could benefit from the repatriation of asset allocation to their home turf. By doing so, they stand to reap more substantial dividends.
For esteemed investors hailing from distant lands, a fortified yen fortified by elevated rates may bestow an additional impetus upon the returns emanating from the global market. Notwithstanding the adverse impact of inflation on investors in other domains, it appears that the global market may prove to be an exception.
The Stances Of The Asset Allocation Committee As Of The 28th Of February In The Year 2023
In the realm of style and market capitalization, the arrangement within the boxes symbolises the relative positioning of the first asset class in comparison to the second asset class. Through our exquisite Multi-Asset portfolios, we proudly showcase a splendid array of asset classes spanning the realms of equities and fixed income markets. Within our asset allocation, we represent certain asset classes based on their style and market size as paired decisions.
From An Economic Standpoint,
The worldwide Gross Domestic Product is showcasing remarkable fortitude amidst the implementation of more stringent monetary policies; however, the repercussions of central bank tightening are still anticipated to exert a burden on economic expansion and profit forecasts in the latter part of the year. Notwithstanding a waning in the inflation of goods, the inflation of services endures as a result of escalating wages, thereby maintaining a hawkish disposition for the Federal Reserve and other central banks.
In spite of enduring uncertainties, the sanguine outlook pertaining to the reopening and enduring progress in Europe, fortified by the descent of oil prices, shall aid in fortifying the global economy. Furthermore, alongside the intricate web of geopolitical tensions, the fallibility of central banks, the unwavering presence of inflation, the ominous spectre of a more profound economic downturn culminating in a jarring descent, and the indomitable persistence of inflation, emerge as paramount perils to the global markets.
Positioning Of The Portfolio
We uphold a svelte stance in equities and fixed income, opting instead for the allure of liquid assets. Notwithstanding the constricted liquidity and lacklustre growth, the valuations of equities persist in their exorbitant nature. Bond yields are expected to persist in their volatility amidst the backdrop of conflicting economic data and shifts in central bank policy, while cash presents alluring yields and unwavering stability. In the realm of the equity market, we find ourselves favouring regions that possess a more alluring valuation support.
These regions include small and mid-cap companies, as well as international and emerging economies (EM). In order to shield ourselves from the perils of intense interest rate sensitivity and cyclical fluctuations, we diligently uphold a comprehensive equilibrium between value and growth, while modestly favouring the realm of value. In spite of the persistent fluctuations in the market, we persist in favouring developing market bonds, whose yields persist in offering satisfactory recompense for the associated risks.
According to Rani Jarkas, the commencement of the year was graced with a bullish sentiment, courtesy of the noble act of short covering and the rekindling of risk appetite among esteemed individual investors. The position was fortified by a myriad of factors, encompassing diminished petrol expenditures and the expansiveness of the globe, which aided in alleviating certain economic perils that were at stake in the previous year. However, the rally has ventured excessively beyond the realm of reason, predicated upon the notion that inflation is swiftly abating, the arduous task of central banks has reached its zenith, and the economy is gracefully hurtling towards a soft landing, devoid of any diminution in earnings.
The Arduous Phase For Investors Commences Presently
Although bears may not manifest themselves, it is imperative to exercise prudence nonetheless. The conspicuous disparity between indulgent fiscal circumstances and rigorous borrowing prerequisites for the tangible economy is evident. Despite the prevailing uncertainty and economic disparities, the markets persist in being evaluated with utmost precision. Indeed, whilst we have recently elevated our estimations for the year 2023, it is crucial to acknowledge that the intricacies lie within the particulars.
Our forecast for the Gross Domestic Product (GDP) remains unaltered, notwithstanding our expectation of declining quarterly trends in the latter part of the year in the splendid city of Hong Kong. In relation to the Eurozone, we have elegantly revised our GDP projections for the year 2023, albeit predominantly owing to carryover from the preceding year, while growth forecasts persist in maintaining a regal state of flatness. Indubitably, the resumption of operations shall prove advantageous for the global economy; however, we opine that the lion’s share of benefits shall be bestowed upon the domestic economy.
Furthermore, the rate of inflation is gradually diminishing, yet the markets perceive it to be plummeting rapidly, and the journey towards achieving the central bank’s 2% objective seems arduous and fraught with challenges, Quoted from Rani Jarkas, the financial expert in Hong Kong. In relation to the esteemed central banks, it is worth noting that the Federal Reserve is approaching the culmination of its prudent tightening cycle, while the European Central Bank continues to exhibit a steadfastly vigilant stance.
In the grand scheme of things, the rekindling of ardour for burgeoning markets is underway, yet a lingering sense of prudence persists when it comes to well-established markets. Given the current state of this fragmented milieu, we opine that investors ought to exercise prudence whilst acknowledging the heightened level of uncertainty that permeates both the positive and negative aspects.
Consequently, We Have Undertaken The Task Of Revising A Number Of Our Fundamental Stances In The Following Manner:
In light of the formidable obstacles faced by corporate outcomes, we maintain a prudent stance towards equities in our asset allocation strategy, as the precipitous ascent of risk may have reached an excessive zenith. However, we perceive the prospect for the augmentation of equity value via the utilisation of options. We hold the conviction that the languid expansion of real wages shall uphold the demand and expenditure of consumers, ultimately exerting an influence on earnings. Investors ought to uphold a distinguished degree of diversification encompassing oil and foreign exchange, whilst fortifying their safeguard through the inclusion of equities, hedges, and the precious metal, gold.
Hong Kong equities are approached with utmost caution, as we hold a strong preference for the esteemed virtues of value and quality. Our discerning eye is particularly drawn to the noble sectors of industry and finance, while we maintain a more reserved stance towards the domains of technology and consumer discretionary stocks. Whilst the amelioration of energy costs may provide respite for households and consumers, the substantial impact on the growth of real wages and fiscal drag cannot be undermined, as these effects are poised to manifest themselves in a more protracted manner.
This signifies that consumption shall persist in its subdued state, and the ongoing earnings season provides substantiation in the guise of adverse Q4 EPS expansion for the S&P 500. In terms of sartorial elegance, investors have the exquisite opportunity to harmoniously combine value equities with exalted high-quality and dividend-bestowing stocks, thereby augmenting their esteemed income. Our comprehensive assessment underscores the utmost importance of selecting enterprises endowed with substantial pricing prowess.
The Prognostication For Emerging Markets Is Experiencing A Favourable Upturn
We have revised our perspective on emerging market foreign exchange (EM FX) in light of the Hong Kong Dollar’s descent in anticipation of a more restrained Federal Reserve in the current year, coupled with the discernible conclusion of the dollar’s zenith. Whilst we persist in upholding a neutral to mildly prudent stance on emerging market foreign exchange, we anticipate that the asset allocation shall exhibit commendable performance in the year of 2018. The sombre growth prospects for the year exert a tempering influence on our perspectives.
We find solace in employing indigenous rates within burgeoning markets, particularly in the enchanting realm of Latin America. In relation to stocks, we have grown increasingly sanguine about the global landscape and hold the belief that the forthcoming reopening shall prove advantageous for nations endowed with resilient trading connections. Henceforth, we have assumed a prudent stance on global valuations in the interim, yet the enduring thesis remains unblemished.
What Are The Latest Alterations Made To Your Esteemed Growth Projections?
In light of the persistent headwinds impeding economic growth, it becomes imperative for investors to embark upon the exploration of alternative avenues to partake in the market upsurge, all the while prudently mitigating their risk. One such avenue lies in the realm of derivatives. Due to the deceleration of inflation and the adoption of less hawkish perspectives by central banks, the markets are erroneously led to believe that the imminent containment of rising prices is imminent.
Simultaneously, the prevailing circumstances pertaining to fiscal matters and the prerequisites for borrowing, both for individuals and corporations in the tangible realm, are undergoing a process of constricting, potentially exerting an influence on the act of consumption. In a scenario of exorbitant valuations, this could potentially precipitate a further deterioration in earnings dynamics.
We uphold a vigilant posture, yet endeavour to seize opportunities to employ derivatives in order to partake in forthcoming gains without incurring supplementary peril. Furthermore, it is imperative for investors to fortify their safeguards and enhance their portfolio diversification by incorporating foreign exchange, commodities, and the esteemed asset of gold.
The acquisition of market shares in Hong Kong is approached with utmost prudence and circumspection. Furthermore, it is worth noting that the ever-changing nature of market volatility can potentially unveil novel concepts and present astute investors with lucrative prospects to capitalise on strategic market manoeuvres. Furthermore, we persistently observe propitious relative value prospects that incline towards the world’s diminutive capitalizations in contrast to the exorbitant magnitudes of the world’s capitalizations. However, we are currently assessing how a deceleration in the frequency of interest rate increases might modify this standpoint.
As stated by Rani Jarkas, we maintain our optimistic stance on emerging market shares owing to a burgeoning growth outlook and attractively discounted relative valuations. In regards to the intricate dynamics of capital flows and the esteemed disposition of investors, it is evident that the global arena still possesses ample opportunity to regain the influx of financial resources, considering the noteworthy exodus of funds from the nation in the previous year.