Market Inconsistencies Can be Explained, Create Opportunities — And Acted On

1 Mar

Advising on investments, wealth management and portfolio construction is complicated. The markets are more volatile than ever and this causes people to worry. My approach is all about diversification through asset allocation with the plan of out performance whilst reducing investment volatility.

What this means, my target is to make the best possible returns while reducing risk and volatility and protecting the portfolio to unknowns. When I meet people they ask many of the following questions and more :-

  • Is the Stock Market recent blip the start of a Double Dip Recession or are the Bulls right and we are on the cusp of the greatest rally in the 21st Century?
  • Should I be selling my gold and oil holdings?
  • Buying into Emerging Markets?
  • Selling all shares and only holding Gilts?
  • Or should I now be buying into China?
  • Or is that selling anything to do with China in anticipation of a “Hard” or is that a “Soft Landing” in their economy.
  • My stockbroker tells me to select the risk profile and they will design a portfolio to match but they seem to stay fully invested no matter what. So who’s giving the advice?

The market yields are pretty consistent with a 10 year Treasury/Gilt Yields, say between 2% – 3%, and gold is almost $1,800? Is $124 Brent oil consistent with cyclically low implied volatility in many market segments, as well as widening spreads for Middle Eastern oil producers?

All of this seems to be rooted in four key factors that investors need to understand in order to navigate a very fluid outlook for markets :-
  • Emerging countries are slowing and Europe is slipping into either a technical recession or a neutral growth phase, the US economy continues to grow but with the help of money being pumped into the system by the Federal Reserve. 
  • The result is a complex and perplexing picture for the world economy as a whole.
  • Some believe the improvement is sustainable and, accordingly, assuming the United States can regain its role as a locomotive for the globe.
  • Others feel that it is just a matter of time before external headwinds once again interfere with global growth momentum, i.e. similar to what happened in the last two years.

Outcome:We have taken an approach to combine assets that act in an inversely proportional manner to one another. The plan is that some assets will make positive returns in a declining market while other the opposite is true. The outcome is a portfolio, which achieves positive returns in many market conditions with the outlook of taking advantage of market inconsistencies when they arrive rather than trying to predict the future market trends.

We will report on the investment returns of the risk adjusted portfolios in the near future.

Any questions email


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