Rethinking Asset Allocation in a Balanced Portfolio
Key Takeaways
• Commodity related assets and USD outperformed other asset classes throughout 2022
• Monetary tightening (tapering, interest rate hikes and balance sheet shrinking) has boosted USD value, yet high inflation triggers investor to seek a hedge that can be found in commodity related assets
• Polls suggest to overweight equity over bond that we think may reflect a tactical move after stock market sell off bringing valuation at a more discounted fashion, yet polls also suggest to raise cash and diversify to alternative assets, while reducing bond holdings
• Taking a view at steady gold price and rising oil prices have indicated that market tone has skewed towards the downside on the back of higher than targeted inflation may persist longer and skepticism over whether the Fed aggressiveness in tightening bringing a soft landing mode for economy and market at the end
• Strategy implication for domestic financial assets : maintain overweight equity over bonds but add corporate bond to optimize risk adjusted return in a balanced portfolio
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