Stocks are the new diversifier
Macro portfolio managers are remarking that Korean equities are considered a diversifying and defensive component of portfolio construction.
The view
These days with the price of bonds, currencies and commodities all seemingly set by Trump’s latest tweet, the thousands of stocks in the global equity universe provide welcome diversifying options and the potential for fundamentals to translate into a winning trade.
However, the blurring of risk exposures across Global Macro and Equity Long/Short strategies caused by macro managers stepping into the deep ocean of individual equities means portfolios are becoming more correlated and having greater thematic equity sensitivities.
Therefore, one must emphasize strategies stylistically distinct from Equity Long/Short like commodity futures trading, quant strategies, and M&A arbitrage to dampen equity correlations.
Global markets & economic data
- US
September PMI data hit multi-year highs, surprising massively to the upside. It was the strongest expansion in private sector activity since July 2021.
- Switzerland/UK/EU
The SNB held interest rates at 0%, bucking the recent trend of global central bank hiking decisions. UK September Services and Manufacturing Activity both held in expansionary territory. Germany’s GfK Consumer Confidence indicator fell with sentiment sagging due to elevated energy prices.
- China/Japan
Chinese FDI fell 5.3% y/y in August. Japan September Services and Manufacturing PMIs were both below expectations.
Disclaimer: This material has been prepared by MASTERPIECE ADVISORS for informational purposes only and should not be construed as financial advice. Investments in hedge funds are speculative and involve a high degree of risk. This material is confidential and may not be disclosed without the express written approval of MASTERPIECE ADVISORS.
Weekly market notes every Friday from Aaron Sweeney after the closing bell.