CIO Insights 4Q22
Dear valued clients,
Markets saw no relief last quarter with increasing concerns of a global recession. After five rate hikes by the Fed totalling 300 bps since March, Treasury bond yields have more than tripled while equities have fallen 25%.
We see the Fed Funds rate rising towards 4.5% before taking a temporary pause for the Fed to assess the full impact of these hikes on the labour market and inflation.
The big question remains – have the markets sufficiently priced-in these headwinds?
Beyond the near-term market volatility, we see value emerging. We continue to advocate for portfolios to hold high quality bonds and stocks. For those with high cash levels, adopt a “dollar-cost average” approach to add A/BBB-rated bonds that are currently trading north of 5% as income generators in our barbell portfolio strategy. For secular growth equities, I.D.E.A. companies (Innovators, Disruptors, Enablers, Adapters) currently offer valuation buffers.
This quarter, we also highlight the investment themes of Luxury and Healthcare as beneficiaries of new lifestyle choices and demographic changes.
Do enjoy the read.
Hou Wey Fook, CFA
Chief Investment Officer
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