Top Traders Unplugged

GM51: Allocating Assets when Goldilocks Inverse ft. Christian Mueller-Glissmann

Oct 4, 2023

Goldman Sachs Head of Asset Allocation Research, Christian Mueller-Glissmann discusses the importance of capital allocation in a dynamic global environment. The speakers delve into the breakdown of relationships between stocks and bonds, explore the predictive nature of the business cycle, and highlight the impact of structured products on equity volatility. They also discuss the difficulties of owning bonds in the trend following world and the use of machine learning in asset allocation.

01:04:53

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Episode guests

Christian Mueller-Glissmann

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Quick takeaways

Creating a balanced portfolio that addresses risks while capitalizing on opportunities is crucial for investors, with a focus on strategic asset allocation and adapting to changing global environments.

Understanding the interaction between the sentiment cycle and the business cycle, as well as the impact of inflation and policy, is essential for effective asset allocation.

Active management is becoming increasingly important in the evolving market landscape, with opportunities for tactical asset allocation and stock picking in smaller bear markets and the potential shift towards more sophisticated portfolio construction.

Deep dives

Risks and opportunities in portfolio creation

The podcast episode emphasizes the importance of creating a portfolio that addresses risks while also capitalizing on opportunities. The biggest threats to a portfolio are identified as inflation and stagnation. To mitigate these risks, it is recommended to incorporate strategic asset allocation (SAA) that takes into account the structural cycle risk and its longer-term implications on asset prices. The goal is to balance the portfolio without being overly aggressive on predictions. The episode highlights the need for portfolio adjustments to adapt to changing global environments.

Introduction

2min

Allocating Assets in a Changing Global Environment with Christian Mueller-Glissmann

2min

Analyzing Macro Framework and Inverse Goldilocks in Asset Allocation

4min

Understanding the Breakdown of Relationships between Stocks and Bonds

5min

The Interaction Between Business and Structural Cycles: Market Predictions and Risk Outcomes

32min

The Impact of Structured Products on Volatility

15min

Challenges in owning bonds, cycles, and machine learning based asset allocation

5min

Goldman Sachs Head of Asset Allocation Research, Christian Mueller-Glissmann shares his current investment framework with Cem Karsan and I today. It's an important conversation as it touches on so many of the most important questions that investors, individual as well as institutional, are faced with right now. How we as investors should allocate our capital taking into account the ever changing Global Macro regimes was fascinating to explore, with one of the sharpest thinkers on this topic. Like Cem and I, you will be impressed with the depth of research and knowledge that Christian shared in our conversation.

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Episode TimeStamps:

02:33 - Introduction to Christian Mueller-Glissmann

04:05 - The global macro perspective

08:13 - The changing relationship between stocks and bonds

12:25 - Structural and cyclical issues

21:35 - Is this inflation different?

28:15 - The lag of structural effects

32:04 - The age of abundance

36:45 - Time to shift back to active management

43:10 - The introduction of derivatives and how it affects the economy

52:21 - A move away from bonds and how it will affect us

01:00:06 - Does the interest cycle exist?

01:00:52 - The Dynamic Balanced Bear

01:03:21 - Final thoughts

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