Re-adjusting too much your positions in your listed portfolio is probably not worth the trouble. Reading the latest piece from Goldman Sachs, and jumping directly to their conclusion to avoid too much brain damage, they declare that much of the rotation of growth into value is behind us. According to them, value will continue to outperform in 3Q21 but growth will outperform in 2022.
Well, this strongly advocates for not moving much your positions around, risking to get the timing wrong. This goes back to saying that short-term inflation pressure will likely favour financial companies, but it is probably far-fetched to think that the long game of deteriorating demographics and rising debt piles will change at all. Bottom line, investors will still have an advantage to pursue growth where it is. So probably too late to pivot into value stocks if you haven’t already.
Come 2022, if you follow the chain of thoughts, we’re likely to be stuck in a low-rate environment much longer, as growth will soon in FY22 go back to a subdued level. While tech equities should give you some comfort, they bear a risk and volatility that is not for everyone. And let’s face it, if no correction happens between now and then, there is probably not a lot of juice left.
In normal circumstances, you would reallocate towards fixed income that would normally steady your portfolio, while giving you some safe haven in directionless markets. The issue is that with a 10-year UST at 1.5%, you’ll have to add a lot of credit spread to make it worth your while. Adding duration is not a fancy option either, as it will leave you exposed like a rabbit crossing the street at night staring at the car headlights.
Again, the new reality of your investment portfolio is to further diversify into niche assets and strategies. DeFi is one of the greatest opportunities we see at the moment. As for other private investments, the inflow of $7tn capital chasing deals in the space has severely compressed the returns and made it rather un-sexy. Only what’s hot should get you moving.
360 Advisory – Markets