CIO Insights 1Q25: Game Changers
Chief Investment Officer Hou Wey Fook calls for a barbell strategy to ensure portfolio resilience in a time of change
Chief Investment Office13 Dec 2024
  • Stay invested as the Fed leans on lowering rates in a soft landing economy
  • Sports franchises present a compelling theme, alongside our continued conviction call for US tech
  • Slower growth from escalating trade war will lead to lower rates and upside for bonds
  • Private assets with their low correlation to bonds and equities provide diversification
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Dear valued clients,
 
Over the past year, we have been advocating for portfolios to be fully invested, with our quarterly Insights publication having the three consecutive headlines of “A Broadening Rally”, “Risk Assets in Play”, and “In a Sweet Spot”. 

Indeed, these calls have panned out as risk assets of credit, equities, gold, and private assets rallied. Consequently, our flagship barbell strategy returned 15.6% (as of 4 Dec 2024) for the year. 

Going into 2025, would this same pro-risk narrative remain? 

For sure, navigating the world around game-changers like geopolitical tensions and Trump’s potential tariff policies will pose challenges. When constructing a portfolio, we must consider the worst-case scenarios. While we stay broadly positive of risk assets, our strategy of holding investment-grade credit as income generators, secular growth equities as return enhancers, and alternatives like gold and hedge funds as diversifiers should help weather periods of heightened volatility. 
Our overweight stance on US technology equities continues to be our highest conviction call for growth, catalysed by the growing adoption of AI. Investment-grade credit is our anchor for income generation, especially in a US soft landing scenario that would lead to a trajectory of lower rates. 

In the event of an escalating trade war that will certainly accelerate a global slowdown, we expect a lifeline to come from boosted returns in investment-grade bonds as the Fed will most likely respond with accelerated easing. This scenario is not dissimilar to 2018-2019 when President Trump imposed tariffs and other trade barriers on China. 

Meanwhile, holding some uncorrelated assets like gold and hedge funds will add overall resilience to the portfolio. In this publication, we highlight the exciting investment potential in sports, given the growing appeal for live sports compounded with the scarcity of sought-after franchises. 

Do enjoy the read, and I wish you a profitable year of investing! 

Hou Wey Fook, CFA
Chief Investment Officer



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