Our risk exposure is neutral as we await signals from our investment climate indicators on the direction.
The US economy is now our biggest worry as a slowdown is finally revealed in data. GDP growth under 2% is a risk for H2 2019.
The greatest Risk asset support is Liquidity, which now clearly underpinned by verbal intervention from FED.
The economic impact of the trade dispute is still tricky to access. Cold War 2.0 is the most dreaded scenario.
CAP-M portfolio shifts
•We have closed an overweight in Core Eurozone bonds, and opened an overweight position in IG.
•We maintain an underweight in global HY
•We have revised up our position EM equities and moved from a double underweight to now a normal underweight.
Status on May 2019
• Over the last month, only our CAP-M Light portfolio has shown positive performance (+60bps). The CAP-M live portfolio lost 60bps, while CAP-m++ lost 30bps. Our benchmark lost 140bps in the same period.
• Worth noticing is that our High-Risk portfolio EMD and HY did much better than the segments of the equity market.
• In our Low-risk portfolios, the long government bond segments did very well and showed the negative correlation to Risk assets that justifies exposure to these assets despite their weak valuation profiles.
• The factor portfolio did better than the other sub-portfolios last month. Notice the poor performance for Value, while Low Vol did what it does best outperform in risk-off ‘ periods.
• Also, the Alternatives portfolio was estimated to do better than our listed sub-portfolios. We have just received data for Q4 for Private equity, which showed a downward adjustment of aggregated asset values of -1.7%. The performance for PE so far in 2019 is +5.4%, which is weaker than our Global equities portfolio with +12.9% year to date. With the new Q4 data, the 12-month performance for PE is, still up 11.2 vs. Listed Equities’ 5%.