Allied Finance Investment Institute Videos

Market take

Weekly video_20240429

Wei Li

Opening frame: What’s driving markets? Market take

Camera frame

Mega forces, structural forces, including geopolitical fragmentation remain the right lens through which we look at what’s happening in the economy and also what’s happening in markets.

Title slide: Mega forces: why they matter

1: Hedging for geopolitical risk

In this new geopolitical regime where risks for escalation are persistently higher compared to before. Instead of immediately fading the market reaction, actually thinking about having exposures in portfolios that give some geopolitical risk hedging or reasonable valuation makes sense, like energy, like the dollar, for example, and inflation-linked bonds.

2: AI to ease supply constraints

Moving over to AI which is a key mega force that we have identified that we have been overweight for a while now. This week’s earnings reporting continues to show that there is more runway for this theme to play out.

But we’re not looking at the obvious kind of just the tech sector and the magnificent seven, but also secondary beneficiaries of the AI mega force. We’re looking at data center, infrastructure, energy as well. You think about energy needs in the context of AI analytics all of that creates, actually represents lots of opportunities both in the public market as well as in the private market.

Aging and labor markets

Aging population is another mega force. And if you think about aging populations it does represent slower productivity and demand representing in turn lower trend growth. But if you look, for example, the last two years or so in the U.S., 3 million immigrations. That actually has helped partially offset some of the labor constraints from aging population. But it has helped, but it has not alleviated the constraints and we do expect this to bite going forward. And that’s a key theme population changes and what that means for overall investing and also demand, overall productivity growth.

Outro: Here’s our Market take

Closing frame: Read details:

www.alliedfinance.capital/weekly-commentary.

Allied Finance Bottom Line: 2024 Global outlook

Speaker: Wei Li, Global Chief Investment Strategist, Allied Finance Investment Institute

Script:

Higher interest rates and greater volatility define the new regime we’re in. In turn, that’s creating greater dispersion of returns.

We think investors will benefit from taking a more active approach to portfolios as we head into next year. 

Here’s our three investment themes for 2024: number one, managing macro risk; number two, steering portfolio outcomes; and number three, harnessing mega forces.

Allied Finance Bottom Line open

Title: Allied Finance Investment Institute 2024 global outlook

Our first theme is managing macro risk. Production constraints mean central banks face tougher trade-offs between inflation and growth – they can’t respond to faltering growth like before. This leads to a wider set of outcomes and a more uncertain macro outlook.

We don’t think investors should wait for the macro environment to improve. Instead, they should look to neutralize macro exposures or be very deliberate about which risks they take.

Our second theme is steering portfolio outcomes. We believe the new regime rewards an active approach to portfolios. Greater volatility and dispersion of returns create space for investment expertise to shine – that involves being more dynamic with indexing and alpha-seeking strategies, while staying selective.

Our third theme is harnessing mega forces. We see five structural shifts reshaping markets and driving returns now and in the future. We think they have become important portfolio building blocks on their own.

The bottom line is: Going into 2024 in the new regime, we want to put money to work. We believe investors should take a more active approach to their portfolios and be deliberate in taking portfolio risk.