By David Bailin
Chief Investment Officer
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We think reducing exposure to the world’s most expensive fixed income securities is wise.
• It is quite telling that world financial markets swung sharply on news of a Russian-made Covid vaccine that has no clear path toward global use. We see the market reaction as a “dress rehearsal” for a real post-Covid cyclical recovery.
• Investor positioning is crowded in interest-rate sensitive defensive assets such as gold, Treasuries and tech stocks. Tech has risen very sharply, aided by its fundamental value in proving solutions for social distancing in the Covid economy.
• Covid is not done restraining the world recovery or scaring investors. For longer-term portfolios, rotation between expensive Covid defensives and cheap Covid cyclicals is recommended.
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• We have never abandoned a focus on the Unstoppable Trends that have sought to protect equity investors this year. For now, one should hold a balance of the best values in both. To make room in portfolios, reducing exposure to the world’s most expensive fixed income securities is wise.