Yes, investors should diversify in a risk-controlled manner, as mega-cap tech stocks have delivered exceptional fundamentals but are expensive and represent an outsized share of the equity markets.
In this edition of VantagePoint, we find that consumers, corporations, and the banking sector remain in good shape, and while US/global economic growth is likely to slow in the second half of 2024 relative to the first, we expect it will remain positive. Although market concentration risk is elevated, given its focus on highly profitable AI-related tech stocks, we would seek to be measured about diversifying such risks.
Building outperforming portfolios in long-only equities is hard work but worth the effort. Engaging in deep research to identify firms with a repeatable competitive edge and strong organization that can stand the test of time is far more relevant than analyzing short-term performance. Selecting the right managers is only the first step. Constructing portfolios requires careful consideration of manager and market dynamics to adjust for shifting factor exposures and avoid unintended bets for which investors are unlikely to be compensated.
No, we anticipate performance will broaden out beyond mega-cap tech stocks, which have driven US equity performance in recent years.
In this edition of VantagePoint, we review the drivers of US outperformance in the context of historical expansions, consider what markets are pricing in, and if stronger fundamentals for US equities justify higher valuations.
We expect global equity performance will be below its long-term median level, but we believe investors should hold equity allocations in line with policy targets. Within equities, we see opportunities in developed value, developed small caps, and China. We doubt European and emerging markets ex China equities will outperform, and we believe the share of active strategies that outperform will increase.
We expect more companies will set science-based targets to reduce their emissions and develop credible transition plans to meet their targets. We believe funds raised by natural capital strategies will hit a new record and that California carbon allowances will outperform global equities.
The shifting geopolitical realities between the United States and China have already impacted trade and investment flows. In this two-part series of VantagePoint, we review this reality and consider investment implications alongside those of other key factors—such as domestic structural developments, macroeconomic conditions, and valuations. In Part I, we focused on opportunities in China specifically. In this companion piece, we discuss investment opportunities beyond China.
The shifting geopolitical realities between the United States and China have already impacted trade and investment flows. In this two-part series of VantagePoint, we review this reality and consider investment implications alongside those of other key factors—such as domestic structural developments, macroeconomic conditions, and valuations. In Part I, we focus on opportunities in China specifically, and in Part II, we discuss other Asian investment opportunities beyond China.
The devastating loss of life resulting from Hamas’s surprise attack on Israel is at the forefront of our concerns. Risk of a prolonged conflict in the region has grown, creating a new layer of uncertainty on many fronts, including the global economy and markets.