Multi-asset allocation in anticipation of a soft-landing

The performance of both equities and bonds in 2022 tested the resilience of multi-asset strategies and suggested it might be time to rethink how portfolios are structured. This quarterly edition of Simply put questions claims that the 60/40 portfolio is dead and examines whether the unfolding global recession is likely to result in a soft or a hard landing. Key topics include:

• The 60/40 portfolio has served as a reliable blueprint for investment strategies for decades. The events of recent years tested the notion that equity performance will compensate for bond weakness, and vice versa, potentially upending conventional approaches to asset allocation. However, we believe it is wrong to call time on the classic portfolio structure
• Macro data suggest the world has entered recession territory. Europe is currently the outlier and whether this downturn ends with a soft or hard landing may depend on how the European Central Bank (ECB) proceeds with tightening measures in 2023
• A portfolio risk-return profile can be enhanced by incorporating satellite strategies, such as Alternative Risk Premia (ARP) and Portfolio Insurance overlays. However, investors should pay attention to in-sample bias when choosing
• Most traditional asset classes offer limited protection during a high-inflation regime. In the current environment, are investors better off with inflation-linked bonds or inflation swaps?  

For more, please read the Q1 2023 issue of Simply put using the download button provided.

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