How we are managing our clients' portfolios
Rising inflation and variant concerns loom over the markets as the COVID-19 pandemic creeps into 2022 and refuses to retreat quietly into the night. We believe the spike in inflation—fueled by supply-chain disruptions, labor shortages, and surging consumer demand—is mostly transitory, although it could reach uncomfortably high levels early this year before declining as supply-side issues are resolved. While global economic growth will be slower than in 2021, we anticipate it will remain above trend in 2022, nurturing a conducive environment for equities to outperform bonds.
Now, perhaps more than ever, it is critical for investors to stay anchored in a reliable, methodical investment decision-making process that cuts out the noise and focuses on business cycles, asset valuations, and investor sentiment. Our investment strategists are keeping a close watch on broad macroeconomic trends as well as rising COVID-19 infections and renewed lockdown risks, while our portfolio managers maintain moderately risk-on positioning relative to strategic levels in client portfolios, which is driven by our value equity managers and asset allocation views. We believe it is critical that investors are aware of the key drivers of risk and return as well as sources of bias in their portfolios that may limit exposure to upside opportunities—whether it be a bias for growth stocks or a home-country bias.
Here is how we are managing these economic and market shifts in our clients' multi-asset portfolios, using our cycle, valuation, and sentiment (CVS) investment decision-making process.