Asset Allocation

After a substantial rally, Artificial Intelligence (AI) stocks are still reasonably valued, according to Johannes Jacobi, an AI specialist at Allianz Global Investors. In a conversation with Investment Officer Belgium, Jacobi emphasized that from an investment perspective, the valuations remain favorable, while other sectors are yet to catch up.

High inflation is far from tamed, and profit margins are expected to deteriorate. Therefore, it is prudent to adopt a more defensive stance in portfolios, according to Christoph Schmidt, senior portfolio manager of DWS Concept Kaldemorgen, in a with Investment Officer.

As pressure mounts on investors to allocate larger portions of their portfolios to alternatives, Stuart Dunbar, a partner and director at Edinburgh-based investment manager Baillie Gifford, stresses the need for careful consideration. He highlights the limited supply of high-quality opportunities as a critical factor. “We can’t just rush into the alternatives.”

The world’s largest active bond house is warning that, despite last week’s declines, stock markets are still too optimistic about the ability of central banks to stave off a recession.

This recession, says Pimco’s global strategist Gene Frieda, is the most anticipated of all time, but it is indeed coming. He believes that the optimism in the stock market is premature: “Markets are still pricing in interest rate cuts too soon,” the strategist tells Investment Officer.

The Federal Reserve’s predicted interest rate peak between 5.5% and 5.75% has left many asset managers uncertain about their rate forecasts for the second half of the year. However, Franck Dixmier, the global CIO at Allianz Global Investors, is undeterred by this ambiguity, stating, “Monetary policy is really starting to bite now.”

“Active management is a sham — no wonder my returns are suspect,” writes Stuart Kirk, FT columnist and former portfolio manager, in his latest attack on active management. However, he conveniently overlooks one important detail.

More exposure to low-volatility European equities, high quality bonds in the U.S. and a bit in liquid hedge funds, and less to high quality European corporate debt, lower quality corporate bonds and gold. These are the portfolio shifts Luxembourg-headquartered Quintet Private Bank advises to its clients in its latest midyear investment outlook.

May saw a 6.1 percent increase in consumer prices in the EU compared to the previous year, the lowest level since February 2022 and slightly lower than economists’ predicted 6.3 percent. In the United States, inflation has now dropped below 5 percent, the lowest level in two years.

Panic over banks and falling treasury yields have gold prices flirting with an all-time high again. In the short term, a quicker turn by the Federal Reserve may be the deciding factor, but the precious metal’s real success lies deeper. “Gold deserves a structural role in the portfolio.”

Gold prices briefly climbed past the 2,006 dollar per troy ounce level last week. With that, the August 2020 all-time high of 2,075 per troy ounce is getting closer.

Green bonds are becoming mature and are a good diversification in a portfolio because they provide above-average transparency, according to Julien Bras (photo), bond manager at Allianz Global Investors. 

Bras argued that green bonds are an interesting way to get more diversification in bond portfolios. “The main argument for me to include green bonds in portfolio is their transparency compared to traditional bonds.”