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Investors reassess strategic asset allocation as negative correlation returns

With the restoration of the negative correlation between equities and bonds, the structure of strategic asset allocation is once again under debate among asset owners and asset managers. Was the shift away from the traditional 60/40 portfolio towards a permanent allocation to private markets a lasting course correction — or merely a temporary response to an extraordinary period? Investment Officer spoke to four leading investment professionals.

Share prices follow earnings, always

Stocks follow earnings per share. Over the long term, the correlation between earnings growth and share price performance is as high as 98 percent. Everything else is noise. Macro fears, geopolitical tensions, quarterly results that fall short by a fraction — in the long run, they hardly matter. What counts is how much a company earns and how those earnings develop over time.

Iran’s oil shock puts the Teflon-market thesis to the test

Markets enter the week facing not simply another geopolitical headline, but the prospect of a structural energy repricing. After US-Israeli strikes killed Iran’s supreme leader and Tehran retaliated across the region, investors are bracing for a sharp adjustment in oil and gas markets when trading resumes. The issue is no longer whether risk premia rise, but how disruptive and persistent they may become. “The implications for energy markets and commodities, especially for crude oil and LNG flows, are asymmetric and could trigger severe market reactions very soon,” said Cyril Widdershoven, a senior advisor at Blue Water Strategies.