A Classic of its Kind

Friday, August 2nd, 2024   Categories: Correction, Defensives, Equities, Seasonality, Sector Strategy

De-risk your equity portfolio

Our multi-asset models have significantly reduced their exposure to global equities. The US dollar version is already neutral; we expect the euro version to get there in the near future. We have long argued that there would be period of seasonal weakness in equities in Q3 and this has arrived bang on schedule. The narrative behind it is of secondary importance, but current fears about a US slowdown should be enough to persuade investors not to rotate into Small Caps. The trade which works is to de-risk equity portfolios by reducing exposure to cyclical sectors and increasing it in defensives like Utilities, Healthcare, Telecom and even Consumer Staples. We have been recommending this since early June. It’s something all investors can do, even if they are nervous about moving into fixed income, when US 10-year Treasuries yield less than 4%.