Despite projections of 20%+ S&P 500 earnings growth and 4% GDP growth in Q2, and despite good news from consumer/business surveys, jobs, housing and wages, so far this year US equity markets are only up ~6%. The reasons are clear to me: Fed tightening, the eventual fade in fiscal stimulus and market-unfriendly actions of the Administration. In this note, we walk through four investment strategies that have performed well over multiple cycles as this one enters its latter stages. I conclude with a summer reading list inspired by the Helsinki summit.
Regional equity overweight to US and Emerging Markets, underweight to Europe and Japan
Within US equities, overweight to Tech, Staples and Healthcare vs all other sectors
Allocate more to BB-rated high yield bonds than B-rated or CCC-rated bonds
Take positions that benefit from the pattern of Eurodollar forwards overestimating Libor
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