Points Of Perspective On Global Asset Allocation

Our esteemed specialists graciously bestow their profound wisdom upon market themes and regional developments, while also graciously divulging the current positions of our esteemed portfolio. According to Rani Jarkas, the worldwide economy is showcasing remarkable fortitude in the presence of more stringent monetary policies; however, the repercussions of central bank tightening are still anticipated to exert a burden on economic expansion and prospects for earnings in the latter part of the year. Notwithstanding a waning in the inflation of goods, the inflation of services perseveres tenaciously, owing to the escalating remunerations, thereby maintaining the Federal Bank and other central banks in a vigilant and resolute stance in Hong Kong.

In spite of enduring uncertainties, a sense of sanguinity regarding the reawakening of the world and its unwavering progress, fortified by the descent of oil prices, shall serve as a catalyst in elevating the global economy. The grandiose interplay of geopolitical tensions and the occasional missteps of central banks, coupled with the enduring spectre of inflation, the ominous spectre of a more pronounced economic downturn leading to a formidable descent, and an array of other formidable elements, all conspire to present substantial perils to the intricate tapestry of global markets. 

In our esteemed portfolio, the prominence of cash persists, surpassing the presence of stocks and bonds. Notwithstanding the constricting liquidity and languid growth, the valuations of equities persist in their exorbitance. Bond yields are expected to persist in their volatility amidst the backdrop of conflicting economic data and shifts in central bank policy, while cash presents itself as an alluring option with its enticing yields and unwavering stability.

In the realm of stocks, we find ourselves favouring small- and mid-caps as well as asset allocation, as they possess a more alluring valuation support. Furthermore, we maintain a robust overweight stance in core equities, which exhibit diminished susceptibility to interest rate oscillations and possess reduced cyclical tendencies. In the realm of fixed income, we persist in favouring high yield, floating rate loans, and emerging market bonds. 

These Investments Offer Ample Recompense For Risks, Even In The Face Of Enduring Market Volatility

The recent auspicious advancements in consumer expenditure, consumer sentiment, and employment are dreadfully disheartening tidings for the esteemed Federal Reserve, for it appears that their vigorous endeavours to increase interest rates have not yielded the anticipated outcomes of curbing economic expansion and taming inflation. The commencement of the year witnessed a delightful atmosphere prevailing in the markets, owing to the discernible signs of central bank tightening reaching its zenith. Alas, this buoyant sentiment was ephemeral, as prognostications regarding the trajectory of forthcoming interest rate hikes escalated in response to the surging data.

With the advent of his highly anticipated successor, Kazuo Ueda, assuming the mantle of authority amidst the formidable spectre of inflation, it appears quite probable that he shall embark upon further endeavours to unravel the exceedingly lenient policy. Whilst equities and bonds have experienced a general decline in light of the rising inflation and interest rates, it is possible that global markets could benefit from the repatriation of asset allocation to their home turf. This strategic move would enable them to reap enhanced dividends and maximise their returns. 

For esteemed investors hailing from distant lands, a fortified yen, bolstered by elevated interest rates, may bestow an added impetus upon the returns derived from the global market. As suggested by Rani Jarkas, the Chairman of Cedrus Group, notwithstanding the adverse impact of inflation on investors in other realms, it appears that the global market may serve as an exception to this prevailing trend.

The Stances Of The Asset Allocation Committee As Of The 28th Of February In The Year 2023

In the realm of style and market capitalization, the arrangement within the boxes symbolises the relative positioning of the first asset class in comparison to the second asset class. Through our exquisite Multi-Asset portfolios, we proudly showcase a splendid array of asset classes spanning the realms of equities and fixed income markets. Within our asset allocation, we represent certain asset classes based on their style and market size as paired decisions.

From An Economic Vantage Point

The global Gross Domestic Product (GDP) is showcasing remarkable fortitude amidst the implementation of more stringent monetary policies. However, it is anticipated that the consequences of central bank tightening shall exert a considerable influence on economic expansion and profit forecasts during the latter half of the year. Notwithstanding a waning in the inflation of goods, the inflation of services endures as a consequence of escalating wages, thereby maintaining the Federal Reserve and other central banks in a state of vigilant austerity.

Notwithstanding prevailing uncertainties, the sanguine outlook pertaining to the resumption of activities and the enduring progress in Europe, fortified by the decline in oil prices, shall serve to fortify the global economy. Furthermore, alongside the intricate web of geopolitical tensions, the fallibility of central banks, the enduring spectre of inflation, a more profound contraction in economic growth culminating in a severe descent, and the unwavering persistence of inflation all stand as formidable perils to the global markets.

Positioning Of The Portfolio

We uphold a svelte stance in equities and fixed income, opting instead for the allure of liquid assets. Notwithstanding the constricted liquidity and lacklustre growth, the valuations of equities persist in their extravagance. Bond yields are expected to persist in their volatility amidst the backdrop of conflicting economic data and shifts in central bank policy, while cash presents itself as an alluring option with its enticing yields and unwavering stability. 

In the realm of the equity market, we find ourselves favouring regions that possess a more alluring valuation support. These regions include small and midcaps, as well as international and emerging economies (EM). In order to shield ourselves from the perils of intense interest rate sensitivity and cyclical fluctuations, we diligently uphold a comprehensive equilibrium between value and growth, while modestly favouring the realm of value. 

In spite of the persistent fluctuations in the market, we persist in favouring developing market bonds, whose yields persist in offering sufficient recompense for the associated risks. The commencement of the year was marked by a buoyant sentiment, owing to the act of short covering and the resurgence of risk appetite among discerning individual investors. 

The position was fortified by a myriad of factors, encompassing diminished petrol expenditures and the expansiveness of the globe, which aided in alleviating certain economic perils that were present on the table in the previous year. However, the rally has ventured too far, founded upon the lofty expectations that inflation is swiftly diminishing, the noble task of central banks has been fulfilled, and the economy is proceeding towards a graceful descent, devoid of any decline in earnings.

The Arduous Segment For Investors Commences Presently

Bears may not manifest, but prudence must be exercised nonetheless. The conspicuous disparity between indulgent fiscal circumstances and rigorous borrowing prerequisites for the tangible economy is evident. In spite of substantial uncertainty and economic disparity, the markets persist in being priced for utmost flawlessness. Verily, albeit we have recently augmented our estimations for the year of our Lord 2023, it is the intricate particulars that hold the true challenge. Our forecast for the GDP remains unaltered, notwithstanding our expectation of declining quarterly dynamics in the latter half of the year in Hong Kong. 

In relation to the Eurozone, we have elegantly revised our GDP projections for the year 2023, albeit primarily attributed to the carryover effect from the preceding year, while the growth forecasts continue to maintain a regal level of stability. Indubitably, the resumption of operations shall prove advantageous to the global economy; however, we opine that the lion’s share of benefits shall be bestowed upon the domestic economy. 

Furthermore, the rate of inflation is gradually diminishing, yet the financial markets perceive it to be plummeting rapidly, and the journey towards achieving the central bank’s 2% objective seems arduous and fraught with obstacles. In the realm of central banks, the Federal Reserve is approaching the culmination of its tightening cycle, while the European Central Bank steadfastly maintains its hawkish stance. 

In the grand scheme of things, the rekindling of fervour for burgeoning markets is underway, yet a sense of prudence remains prevalent when it comes to well-established markets. Given the current state of this fragmented milieu, we opine that investors ought to exercise prudence whilst acknowledging the heightened level of uncertainty that permeates both the positive and negative aspects.

Consequently, We Have Elegantly Modified A Number Of Our Fundamental Stances In The Following Manner:

In light of the formidable obstacles faced by corporate outcomes, we maintain a prudent stance towards equities in our asset allocation strategy, as the precipitous ascent of risk may have reached an excessive zenith. However, we perceive the prospect for the augmentation of equity value via the utilisation of options. We hold the belief that the languid growth of real wages shall uphold the demand and expenditure of consumers, thereby ultimately impacting earnings. Investors ought to uphold a commendable degree of diversification encompassing oil and foreign exchange, while simultaneously fortifying their safeguard through the inclusion of equities, hedges, and the precious metal, gold.

The esteemed realm of Hong Kong equities is traversed with utmost prudence, as we hold a predilection for the noble virtues of value and quality. Our noble inclinations lean towards the illustrious domains of industry and finance, while we exercise restraint towards the realms of technology and consumer discretionary stocks. Whilst the reduction in energy prices does indeed alleviate a portion of the burden on households and consumers, it is imperative to acknowledge that the impacts on real wage growth and fiscal drag are of considerable magnitude and will gradually disperse over an extended period. 

This signifies that the consumption shall persist in its subdued state, and the ongoing earnings season presents substantiation in the guise of adverse Q4 EPS expansion for the esteemed S&P 500. In terms of style, investors have the exquisite ability to harmoniously combine value equities with exquisitely high-quality and dividend-yielding stocks, thereby elegantly enhancing their income. Our comprehensive assessment underscores the utmost importance of selecting enterprises endowed with substantial pricing prowess.

The Prognostication For Emerging Markets Is Ameliorating

We have graciously revised our perspective on EM FX as the Hong Kong Dollar gracefully descends in anticipation of a less assertive Federal Reserve this year, while it becomes evident that the zenith of the dollar has gracefully waned. Whilst we persist in upholding a stance of neutrality, tinged with a hint of caution, regarding emerging market foreign exchange, we anticipate that the allocation of assets shall exhibit commendable performance throughout the year of 2018. The sombre growth prospects for the year exert a tempering influence on our perspectives. 

We find great solace in employing indigenous tariffs within burgeoning markets, particularly in the enchanting realm of Latin America. In relation to stocks, we have grown increasingly sanguine about the global landscape and hold the belief that the forthcoming reopening shall bestow its benefits upon nations endowed with resilient trading connections. Henceforth, we have assumed a prudent stance on global valuations in the interim, yet the enduring thesis remains unscathed.

What Are The Latest Alterations Made To Your Esteemed Growth Projections?

We have gracefully adjusted our Q4 2023 global GDP growth projection, elegantly lowering it from a modest 0.4% to a refined 0.0% year-over-year. In the latter part of 2023, it is foreseen that economic trends shall experience a decline, owing to the challenges faced in investments and the subsequent decrease in private consumption. The prognostication for the Eurozone’s GDP growth in the year 2023 has been elevated from a dismal -0.5% to a more promising 0.2%, owing to the amelioration of incoming data and the lingering effects carried over from the year 2022. However, formidable impediments endure, and the state of domestic demand is regrettably declining.

In light of the persisting headwinds to economic expansion, it becomes imperative for investors to venture into alternative avenues that allow them to partake in the market upswing while prudently managing their risk. One such avenue is the utilisation of derivatives. Due to the deceleration of inflation and the adoption of less hawkish perspectives by central banks, the markets are led astray into presuming that the imminent containment of rising prices is nigh. 

Simultaneously, the prevailing circumstances pertaining to fiscal matters and the prerequisites for borrowing, both for individuals and corporations within the tangible realm, are undergoing a process of constricting, potentially exerting an influence on the act of consumption. In a scenario characterised by exorbitant valuations, this could potentially precipitate a further deterioration in the dynamics of earnings. We uphold a vigilant posture, yet endeavour to seize opportunities to employ derivatives in order to partake in forthcoming benefits without incurring supplementary peril. Furthermore, it is imperative for investors to fortify their safeguards and enhance their portfolio diversification by incorporating foreign exchange, commodities, and the esteemed asset of gold. Quoted from Rani Jarkas, the financial expert in Hong Kong.

Indomitable Beliefs

The acquisition of market shares in Hong Kong is approached with utmost prudence. Furthermore, it is worth noting that the ever-changing nature of market volatility has the potential to unveil novel concepts and present astute investors with lucrative prospects to capitalise on strategic market manoeuvres. Furthermore, we persistently observe favourable relative value prospects inclined towards the world’s diminutive capitalizations in contrast to the exorbitant magnitudes of the world’s large capitalizations. However, we are currently assessing how a deceleration in the frequency of interest rate increases might potentially modify this standpoint. 

We maintain our optimistic stance on emerging market shares owing to a burgeoning growth outlook and attractively modest relative valuations. In regards to the intricate dynamics of capital flows and the esteemed disposition of investors, it is evident that the global sphere still possesses ample opportunity to regain the influx of financial resources, considering the substantial exodus of funds from the nation in the previous year.