US Bank's Eric Freedman discusses the challenging equity market, favoring the equal-weight S&P 500. David Lebovitz of JP Morgan emphasizes supportive labor market data for easing. Former World Bank President David Malpass warns of a 'perfect storm' of economic issues for the next US president, citing prevailing uncertainty in the economy.
Labor market trends support easing later in the year, hinting at economic stability.
Deep dives
Asset Allocation Strategy in Current Market Environment
Eric Friedman of US Bank Asset Management discusses the shifting asset allocation strategy amidst market conditions. With a focus on adding to risk assets and selling bonds, the emphasis lies on overweighting domestic equities and real assets while underweighting fixed income. The rationale behind this strategic move is twofold: anticipating strong corporate earnings and positioning to hedge against potential inflationary pressures.
Factors Influencing Economic Outlook and Preferred Sectors
In the discussion, Eric highlights the factors shaping the economic outlook. The emphasis is on the consumer sector showing signs of gradual slowdown but staying robust overall, alongside a resilient corporate capex cycle. Key themes driving spending trends include AI, cybersecurity, and big data. The preferred sectors remain tech, energy, financials, and mid-caps, aligning with the expectation of strong nominal GDP growth.
Considerations for Portfolio Protection and Market Valuations
The conversation delves into strategies for portfolio protection amid market volatility. Eric stresses the importance of having various assets classes, including longer duration fixed income exposure and broad commodities exposure. The market's scrutiny of valuations, exemplified by the focus on equal-weighted S&P index, underlines the need for a balanced approach to mitigate risks and capitalize on potential growth opportunities.
-Eric Freedman, US Bank Asset Management Chief Investment Officer -David Lebovitz, JP Morgan Asset Management Global Strategist, Multi-Asset Solutions -David Malpass, Fmr. Under Secretary of the US Treasury for International Affairs & Fmr. President of the World Bank
US Bank's Eric Freedman says the 'punishing' equity market favors the equal-weight S&P 500 index and brings risks to small-cap stocks. David Lebovitz of JP Morgan says 'the overall direction of the labor market and the wage data is supportive of some easing later this year.' Former World Bank President and Treasury Department official David Malpass believes the next US president faces a 'perfect storm' of economic issues, saying 'uncertainty is what's prevailing' in the economy.