Asset Allocation

Superlatives are raining down on India, which seems to have passed China as the promised country for emerging market investors. “It looks like the stars are really all aligned this time.”

High yield bonds are positioning themselves cautiously in the spotlight as recession fears recede and credit quality improves. While junk bonds perform best during periods of robust economic growth, a region that’s closely flirting with a recession is seen as having the most potential.

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.