Our investment recommendations proved timely during 2018, leading to significant outperformance of a global multi-asset benchmark portfolio. The major highlights included:
- Heading into 2018 we warned that U.S. inflation would reappear and catch fixed-income investors wrongfooted. The outcome would be the bond bear market working its way further out the yield curve, with the benchmark U.S. 10-year Treasury yield punching through its 2017 highs and rising sharply to 3% before consolidating. In November we cautioned that technical conditions and macro forces point to a near-term decline in yields.
- We pared back equity exposure near the January 2018 peak on expectation that the sharp rise in bond yields and increasing protectionist rhetoric would leading to a correction/consolidation phase after the previous strong bull run. Our recommendation for a mix of cyclical and defensive sectors also proved correct.
- A winning theme for the year was that implied equity volatility would spike. This recommendation is symbolic of a broader theme that the dynamics between equities and bonds changed materially this year.
- In terms of commodities, we benefited from shorting gold earlier in the year and by leaning against the bullish consensus on crude oil in late-2018 by remaining underweight/short related asset markets.
- Finally, our work on “weak-link” economies or so-called “canaries” to the next global recession is already panning out in a series of profitable equity, currency and fixed-income recommendations.
Please let us know if you would like a list of our latest investment recommendations.