When equity markets are in flux, flex
Sticky inflation. Higher macro and market volatility. Major dispersion in earnings and returns.
When uncertainty is the only certainty, it’s time to fine-tune your approach. Here's how we’re thinking about it.
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How to position portfolios
Dispersion calls for selectivity. “Set and forget” is more likely to be “set and regret” in today’s investing environment. Here are three ways to lean into a more discerning approach.
Dispersion has picked up in the new regime
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Source: MSCI, as of 31 December 2023.
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Source: MSCI, as of 31 December 2023.
Sector performance
| Sector performance (%) | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Healthcare |
3.03 |
10.17 |
18.36 |
37.06 |
18.7 |
7.09 |
-6.32 |
20.42 |
3.04 |
23.90 |
14.10 |
20.34 |
-4.97 |
4.27 |
|
Information Technology |
10.49 |
-2.49 |
13.3 |
28.72 |
16.06 |
4.76 |
11.45 |
38.23 |
-2.60 |
47.55 |
43.78 |
29.85 |
-30.79 |
53.27 |
|
Energy |
12.52 |
0.7 |
2.5 |
18.84 |
-11 |
-22.2 |
27.57 |
5.88 |
-15.18 |
12.48 |
-30.52 |
41.77 |
47.60 |
3.53 |
|
Financials |
4.61 |
-18.5 |
29.36 |
27.33 |
3.17 |
-3.37 |
12.47 |
22.74 |
-16.97 |
25.51 |
-2.84 |
27.87 |
-10.19 |
16.16 |
|
Materials |
21.27 |
-19.8 |
11.3 |
3.43 |
-5.06 |
-15.3 |
22.46 |
28.94 |
-16.93 |
23.35 |
19.94 |
16.32 |
-10.75 |
14.77 |
|
Consumer Staples |
12.7 |
8.58 |
13.36 |
21.28 |
7.31 |
6.35 |
1.63 |
17.04 |
-10.10 |
22.80 |
7.78 |
13.06 |
-6.13 |
2.31 |
|
Consume Discretionary |
24.58 |
-4.74 |
24.31 |
39.24 |
3.93 |
5.48 |
3.14 |
23.69 |
-5.51 |
26.57 |
36.62 |
17.93 |
-33.36 |
35.05 |
|
Communication Services |
10.19 |
0.78 |
6.38 |
31.24 |
-1.91 |
2.53 |
5.66 |
5.82 |
-10.02 |
27.39 |
22.98 |
14.35 |
-36.93 |
45.55 |
|
Utilities |
-0.99 |
-3.28 |
1.82 |
12.61 |
15.27 |
-6.61 |
5.96 |
13.66 |
1.97 |
22.53 |
4.76 |
9.84 |
-4.66 |
0.28 |
|
Real Estate |
21.24 |
-6.4 |
29.69 |
3.55 |
15.05 |
1.05 |
3.79 |
15.58 |
-5.56 |
23.97 |
-4.22 |
29.58 |
-24.46 |
10.96 |
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Source: MSCI, as of 31 December 2023.
1. Strengthen your core
Consider adding some resilience with higher quality companies from sectors like tech and health care, where many companies have been able to pass on higher input costs to maintain healthy profit margins.
We like actively-managed unconstrained funds focused on quality stocks with long-term compounding potential, such as the BlackRock Global Unconstrained Equity Fund.
2. Look for value
Alongside a quality core, we’re looking for opportunities where the potential damage from higher macro and market volatility appears priced in. This search for compelling valuations leads us to banks and the energy sector – including sustainable, low-carbon energy companies.
3. Get picky with emerging markets
Growth-seekers might want to explore opportunities in emerging markets, several of which are poised to benefit as rates come down. Brazil’s central bank, for example, has already cut rates by a long way from their highs, but there’s room for more.
Access individual markets with index-based strategies but consider accessing the bloc with something active and flexible. Roaming across borders could be your best bet for harnessing the forces of geopolitical fragmentation, focusing on markets that look set to benefit from the reshoring and nearshoring of global supply chains.
Emerging Markets Investments
Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore, the value of these investments may be unpredictable and subject to greater variation.
