Multi-Asset Solutions Weekly Strategy Report
- From a portfolio perspective, exposure to tech winners in U.S. equities is not a free lunch. The same growth stories that prompted outsize U.S. equity returns in recent years and a faster recovery from the COVID-19 shock make the U.S. a higher volatility, higher beta market, at least for now.
- The shift is a symptom of rising market concentration, which reflects the potentially powerful influences of investor crowding, swings in sentiment and high valuations, along with business fundamentals.
- We still score U.S. equities as an overweight, and like its tech exposure in combination with cyclical equity markets including emerging markets and Europe.
- Given the S&P 500’s reduced defensiveness, and the fact that bond yields are pinned down by monetary policy, it has become more difficult to find effective portfolio hedges.
EXHIBIT 1: EQUITY MARKET EXPOSURES TO THE ‘WORKING FROM HOME’ (WFH) THEME
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The value of investments and the income from them can fall as well as rise and investors may not get back the full amount invested. Past performance is not a guide to the future.