Asset Allocation
Markets fell in August as fears of a hawkish Federal Reserve returned to the fore. At the Jackson Hole symposium, Chairman Powell emphasized that there is much more work to do to ensure that demand is not contributing to excessive inflationary pressures, and that policymakers are willing to risk some pain to growth, employment and corporate profits to achieve their goals. Both stock and bond markets sold off on the news.
The All-Country World Index was down -3.64% on the month. Similarly, the prospect of higher-for-longer interest rates saw the US Aggregate Bond index fall by -3.04%.
On average, during the month of August, our portfolios were equal weight equities and cash, underweight fixed income and overweight commodities.
During the month of July, our portfolios were equal weight equities, underweight fixed income and overweight cash.
Security Selection
In equities, exposure to the Emerging Markets Internet & E-Commerce theme (EMQQ) contributed to outperformance against the global equity benchmark. In Fixed Income, our active tilt towards short duration bonds and a satellite position in Emerging Market debt contributed to outperformance against the longer maturity fixed income benchmark.
Detractors from Performance
Contributors to Performance
Multi-Factor International Equity ETF
Interest Rate Volatility & Inflation Hedge Theme
EM Internet & E-Commerce Theme
US Value
Emerging Market Debt
Underweight
Overweight
Technology Sector
Western European Equities
Government Debt
Consumer Staples Sector
US Value
Treasury Inflation Protected Securities (TIPS)
Strategic Allocation Rationale
Asset Allocation:
Moving into September, we are equal weight equities and cash. We are overweight commodities and underweight fixed income.
Equities:
We are geographically diversified and selective with our US exposures, favoring quality and companies with pricing power. As economic growth slows and the Federal Reserve increases interest rates, we see better risk/reward in US Value compared to US Growth. In the near-term we are cautious on equities and in the medium-term we are bullish.
Fixed Income:
We are underweight fixed income as high inflation continues to erode real returns and interest rates continue to rise. We favor High Yield and EM Debt. We maintain a short duration profile.
Alternatives:
We are overweight commodities as we see a systemic supply and demand imbalance in the asset class. However, we are monitoring the price action closely for signs of weakness.
Portfolio Changes Since Last Month
Decreased
Increased
Enhanced Cash
Commodities
Disclosures: This information was produced by and the opinions expressed are those of Accuvest as of the date of writing and are subject to change. Any research is based on Accuvest proprietary research and analysis of global markets and investing. The information and/or analysis presented have been compiled or arrived at from sources believed to be reliable, however Accuvest does not make any representation as their accuracy or completeness and does not accept liability for any loss arising from the use hereof. Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein. Any sectors or allocations referenced may or may not be represented in portfolios of clients of Accuvest, and do not represent all of the securities purchased, sold or recommended for client accounts.
The reader should not assume that any investments in sectors and markets identified or described were or will be profitable. Investing entails risks, including possible loss of principal. The use of tools cannot guarantee performance. The charts depicted within this presentation are for illustrative purposes only and are not indicative of future performance. Past performance is no guarantee of future results. Actual results may vary based on an investor’s investment objectives and portfolio holdings. Investors may need to seek guidance from their legal and/or tax advisor before investing. The information provided may contain projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved and may be significantly different than that shown here. The information presented, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.