Asset Allocation
Equities and fixed income fell in September, with the All-Country World Index down -9.39% and the US Aggregate Bond index down -4.14%.
At the September FOMC meeting, fresh off the back of a hotter than expected August YoY CPI print of 8.3%, the FED announced a 75 basis point increase in the target fed funds rate. Chairman Powell’s rhetoric was clearly hawkish, and the adjustments to the FED’s dot plot projections came as a surprise to economists. Investors took it as a sign that the central bank appears to be willing to drive the economy into a recession in order to tackle persistent inflation.
On average, during the month of September, our portfolios were equal weight equities and cash, underweight fixed income and overweight commodities.
Security Selection
In equities, exposure to defensive, income producing stocks via JPM Premium Equity Income Fund (JEPI) contributed to outperformance against the global equity benchmark. In Fixed Income, in the face of rising interest rates, our active tilt towards short duration bonds continues to contribute to outperformance against the longer maturity fixed income benchmark.
Detractors from Performance
Contributors to Performance
Multi-Factor EM Equity ETF
EM Internet & E-Commerce Theme
Diversified Commodities
JPM Equity Premium Income ETF
US Factor Rotation ETF
Laddered Investment Grade Credit
Underweight
Overweight
Technology Sector
Western European Equities
Government Debt
Consumer Staples Sector
US Value
Treasury Inflation Protected Securities (TIPS)
Strategic Allocation Rationale
Asset Allocation:
As we move into October, we are equal weight equities and cash. We are overweight commodities and underweight fixed income.
Equities:
We are geographically diversified and selective with our US exposures, favoring quality and companies with pricing power. As interest rates rise and economic growth slows we see better risk/reward in US Value compared to US Growth. In the near-term we are cautious on equities and in the medium-term we are bullish.
Fixed Income:
We are underweight fixed income as high inflation continues to erode real returns and interest rates continue to rise. We favor High Yield and EM Debt. We maintain a short duration profile.
Alternatives:
We are overweight commodities as we see a systemic supply and demand imbalance in the asset class.
Portfolio Changes Since Last Month
Decreased
Increased
Long Maturity Investment Grade Corporate Bonds
S&P 500
Ultra Short Income ETF
US Value Equity
Disclosures: This information was produced by and the opinions expressed are those of Accuvest as of the date of writing and are subject to change. Any research is based on Accuvest proprietary research and analysis of global markets and investing. The information and/or analysis presented have been compiled or arrived at from sources believed to be reliable, however Accuvest does not make any representation as their accuracy or completeness and does not accept liability for any loss arising from the use hereof. Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein. Any sectors or allocations referenced may or may not be represented in portfolios of clients of Accuvest, and do not represent all of the securities purchased, sold or recommended for client accounts.
The reader should not assume that any investments in sectors and markets identified or described were or will be profitable. Investing entails risks, including possible loss of principal. The use of tools cannot guarantee performance. The charts depicted within this presentation are for illustrative purposes only and are not indicative of future performance. Past performance is no guarantee of future results. Actual results may vary based on an investor’s investment objectives and portfolio holdings. Investors may need to seek guidance from their legal and/or tax advisor before investing. The information provided may contain projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved and may be significantly different than that shown here. The information presented, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.