We can’t predict the future. We can only anticipate, to the best of our ability, what’s likely to happen and take measures to mitigate the risks that we do identify.
When so much is unknown, it can lead to decision paralysis. However, as I keep reminding anyone who will listen, investors still have opportunities. In fact, we’ve developed a range of options to address the impact of what I’d classify as gray swans - those risks that are recognized but less likely.
We continue to see opportunities in corporate risk. We are modestly overweight duration amid expectations of a soft landing for the economy, encouraging inflation data, and anticipating more interest rate cuts by major central banks.
Here’s a summary by asset class:
Table 1. abrdn house view
Source: abrdn, June 2024. The views expressed should not be construed as advice or an investment recommendation on how to construct a portfolio or whether to buy, retain or sell a particular investment.
In the Q3 edition of our Investment Outlook series, representatives of different asset classes once again highlight the latest developments within their investment universes. Some of the articles this quarter explore selected these themes in more detail.
- Fixed Income Investment Director Mark Munro blows the cobwebs off his history books to see how bonds have performed during the 12 months following a first rate cut by the Federal Reserve. Here’s a spoiler alert – many do rather well!
- Corporate activities, such as mergers and share buybacks, are under the spotlight in Global Equities Senior Investment Director Martin Connaghan’s contribution to this quarter’s equities discussion. Will they drive performance? Do we know whether this is even a good thing?
Finally, as market experts debate the potential economic impacts, the US continues to surpass expectations. The combination of alpha and beta in the markets is generating numerous new, or at least rekindled, opportunities for hedge fund investors across different strategies. Find out more about the opportunities within hedge fund strategies – Equity, Event-driven, Macro, and Relative value – and sub-strategies as Russell Barlow explores the primary drivers supporting our favorable outlook for the asset class in the second half of 2024 in our hedge fund outlook.
I hope you enjoy these articles.
*abrdn Investments, Haver, July 2024. The views expressed should not be construed as advice or an investment recommendation on how to construct a portfolio or whether to buy, retain, or sell a particular investment.
Important information
Projections are offered as opinions and are not reflective of potential performance. Projections are not guaranteed, and actual events or results may differ materially.
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Alternative investments involve specific risks that may be greater than those associated with traditional investments; are not suitable for all clients; and intended for experienced and sophisticated investors who meet specific suitability requirements and are willing to bear the high economic risks of the investment. Investments of this type may engage in speculative investment practices; carry additional risk of loss, including possibility of partial or total loss of invested capital, due to the nature and volatility of the underlying investments; and are generally considered to be illiquid due to restrictive repurchase procedures. These investments may also involve different regulatory and reporting requirements, complex tax structures, and delays in distributing important tax information.
Hedge funds use sophisticated investment strategies that may increase investment risk in your portfolio. Among the risks presented by hedge fund investments are: the use of unregistered investments, which may make it difficult to assess the performance of the holding; risky investment strategies, which may result in significant losses; illiquid investments that may be subject to restrictions on transferability and resale; and adverse tax consequences.
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