The market is looking a little weaker, again, from a fundamentals perspective.
ISM manufacturing (released a couple days ago) and ISM services (out overnight) are trending much lower, in quite a few instances below 50 (indicating a contraction, relative to the prior month).
Given that rates have gone from 0% to 5%, this isn’t at all surprising, and the banking crisis of two weeks ago will be forcing a relative tightening in credit standards for loan underwriting officers, which will further weaken activity.
Our stance is relatively unchanged, good reasons to bullish (mostly valuation) and good reasons to be bearish (the Fed is at the “break stuff” stage).
We’ve had small additions to asset classes that have de-rated materially like property (down 20%, depending on your sector, and down by more, depending on your start date), noting that our starting weights were also small to begin with.
It is the same for infrastructure.
Otherwise, we continue to be a little defensive, relative to our SAA weights. If things go badly, and there’s quite a reasonable chance that they will, we will have a lot of firepower to deploy.
If they muddle through, well, we’ll probably underperform a touch, but nothing too bad, and still stay on target for our CPI + X objectives.
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