Quarterly Market Update – Q1 2020

Happy New Year – and a new decade – the Roaring Twenties anyone?

Here is a summary of our March 2020 quarterly views which was released on the 1st of January.

What’s different from the prior quarter?

Net-Net our calls have been to up our Risk-on exposure.

We have moved Equity allocations up in European and EM sectors on mostly a (relative) valuation basis and improved sentiment. We do believe that momentum will continue to carry the US and Australian Equity markets higher, but feel that the rest of the world is – for the quarter – is a more compelling tilt and the better risk/reward play.

To ‘fund’ these calls on a portfolio basis, we did reduce our Alts from a heavier O/Weight to a milder one. We still believe diversification into low and uncorrelated classes is structurally a given for most portfolios. Infrastructure and PE are still attractive.

Probably the most contentious call for the Quarter has been to go Underweight on Fixed Interest.

I know, almost Sacrilegious…..

It’s a broad universe, but the traditional sovereign/longer duration play which was the major recipient of flight monies on trade war concerns and deteriorating economic growth trends, has right now, less appeal to us.

Certainly we are not forecasting a dramatically higher yield curve structure across global markets – just a reasonable bounce after a very hard run. We have also seen some questioning of the negative yield dogma which has captivated a large host of our Central banker brethren. Apart from destroying the economic models of most Western banking structures, the stimulus effect on economic growth has seen to have dissipated.

We still remain attracted to the credit component of the Fixed Income class as the hunt for yield and Risk On appetite will prevail in the immediate future.

Get in touch with a Carnbrea advisor today for the full version of Carnbrea’s Quarterly Market Views.