Premium Investment Service (June)

Picking the Bottom
As a follow on to last month’s inflation outlook where it was detailed that (as consistent with our ‘base case’ scenario) it appears that US inflation is generally trending down and the US Federal Reserve is on track to begin to ease at its December meeting, does this mean that we should become more aggressive in upgrading our Growth allocations now rather than taking an ‘averaging in’ over the next 6mths?

To contrast, our ‘new investment cycle’ key indicators suggest we should not expect equity markets to trough until 2-3mths after the Fed eases. Does this mean that instead of averaging in now, should we wait until the Fed eases and then go ‘all in’?

Knowing what to do from an implementation standpoint around transition points between old and new investment cycles is difficult so this thematic looks at past recession experiences / investment cycle turning points to ‘put some flesh on the bones’ (so-to-speak) in terms of trading rule guidance for the Investment Committee. The aim is to discern what is the best path to take in lifting our Growth allocation given the present macro outlook….


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