By David Bailin
Chief Investment Officer
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Following the recent pullback in various growth equities, we would refocus on diversified asset allocation, with dividends and certain fixed income substitutes being of particular importance.
• Digitization – a Private Bank “Unstoppable Trend” - made it possible for vast parts of the world economy to adapt to social distancing needs and saved many lives as the pandemic progressed. Nonetheless, with “TMT” sectors rising to more than 40% of the US equity market, we have been concerned about markets pricing all tech shares as winners and all other industries as losers.
• Within the past three weeks, the Nasdaq 100 has corrected 12%. In contrast, the Russell 2000 has dropped a mere 3% while non-US shares overall are about flat. In fixed income, falling US interest rates have pushed the global bond aggregate yield – including Emerging Markets and Sub-Investment Grade debt - to below 1.0% for the first time.
• Now that “growth stock” momentum investors don’t feel so invincible, we would refocus on diversified asset allocation, with dividends and certain fixed income substitutes of rising importance to portfolios in the present economic setting.
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