Markets paused to take a breath this week following a six-week ~22% surge. The S&P 500 surrendered a routine ~2.80% – after touching a 12-week high of 5,968. With the market trading at 22x fwd earnings (a premium in any environment) – investors are arguably more mindful of (a) ongoing tariff risks- with new threats from Trump on Europe and Apple; and (b) the thread of rising bond yields – and any potentially widening of the deficit.
Asset Allocation
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Focus on High Quality in Challenging Markets
It’s my thesis market returns over the next few years are unlikely to match what we’ve seen over the past decade. However, I’m also of the view that will create great opportunities for savvy patient investors who think long-term. This missive defines what is meant by “quality” investments – and the attributes investors should focus on. And if we are see a more challenging climate the next few years – it’s higher quality assets which will shine.
‘Trump Dump’ Offers Opportunity
It’s official… the stock market is now ‘on sale’. Panic selling has set in with the VIX trading above 45 – something we have only seen 7 times over the past 25 years. For those who resisted chasing extreme valuations the past 12 months – your patience has been rewarded. Valuations have come down. In turn, the longer-term risk reward is now more attractive than what it was only a couple of months ago. But these are rare times. For e.g., it was the only third time this decade that the S&P 500 shed more than 10% in two days.