2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop
Jun 18, 2024
auto_awesome
Goldman Sachs' experts Christian Mueller-Glissmann and Alexandra Wilson-Elizondo share insights on building portfolios for a more volatile macroeconomic backdrop. They discuss valuations, macroeconomic conditions, market outlook, AI impact on investments, and the importance of diversified portfolios and selective hedging strategies.
Consider profitability when assessing valuations in late cycle scenarios.
Maintain a cautious but positive stance with balanced portfolios in the face of market cracks.
Adjust asset allocations and consider hedging strategies for election uncertainties.
Deep dives
The Macro Backdrop and Market Optimism
The podcast discusses the positive start of the year for investors with US stocks at all-time highs and areas like bonds offering good yields. However, the conversation shifts to potential cracks in the market and the outlook for the second half of 2024. Despite concerns about positioning and sentiment, the macro conditions are seen as supportive, with possibilities of rate cuts and ongoing technology revolutions aiding equities.
Valuations and Investment Strategy
Valuations in late cycle scenarios are examined, highlighting elevated levels that may not necessarily warrant a bearish stance. The discussion emphasizes the importance of considering profitability when assessing valuations. While sentiment and positioning trends are observed, a cautious but positive stance is maintained with a focus on balanced portfolios and potential structural shifts impacting investments.
AI Optimism and Market Dynamics
The significance of AI optimism in driving market performance, particularly late in economic cycles, is explored. While AI enthusiasm is noted as a key market driver, the potential risks associated with fading optimism are considered, with a focus on structural boosts and their effects on equity valuations. The analysis suggests that current market pricing reflects varying probabilities related to AI scenarios, influencing long-term return forecasts.
Election Risks and Portfolio Diversification
The podcast dives into the impact of elections on market volatility and portfolio strategies, highlighting the need for hedging and diversification. Discussions revolve around adapting portfolios to navigate election uncertainties, including considering adjustments in asset allocations based on potential policy changes and geopolitical factors. The importance of active management, strategic hedges, and opportunities for alpha in volatile market phases are emphasized.
Long-Term Portfolio Perspectives
The conversation extends to medium to long-term portfolio considerations, discussing optimal asset allocations and risk management strategies. A nuanced approach involving equity, bond, and real asset allocations is proposed to address diverse scenarios over the next five to ten years. Emphasis is placed on staying agile in late-cycle environments, monitoring broader market themes, and exploring investment opportunities beyond conventional narratives.
Goldman Sachs’ Christian Mueller-Glissmann and Alexandra Wilson-Elizondo discuss their outlooks for asset classes and portfolios heading into the second half of the year, as well as medium- and longer-term asset allocation shifts investors might make to accommodate a more dynamic macroeconomic backdrop.
