We consider fund flow trends and proprietary signals designed to capture crowded positioning and under-owned opportunities within each investment theme:
- Rethinking the role of bonds: Recession is almost a certainty, but high and persistent inflation implies Federal Reserve easing is unlikely in 2023. Investors should consider adding high-quality fixed income to their portfolio at current yield levels.
- Pricing the damage: A higher real-rate regime tends to favor value-style equities, a departure from a decade of growth leadership. For those willing to step out in equity risk, small-caps may present attractive risk on fundamentals at favorable valuations.
- Living with inflation: Core inflation is unlikely to get back to pre-pandemic levels of below 2% in 2023. TIPS and infrastructure equities are historically attractive in a higher inflationary regime.