From the desk of Willie Delwiche.
Key Takeaways:
- 2022 poses an asset allocation challenge
- Commodities catching up, but a long way from being caught up
- Dynamic exposure allows trend following in a portfolio context
The first quarter still has two days of life left in it, though for many investors its end cannot come soon enough. The S&P 500 made a new high on the first day of the year, but has been underwater ever since. Bonds have been in the red all year, suffering their worst decline in decades. Commodities (and the minority of investors that have exposure there) enjoyed their best quarter in decades.
Each of these asset classes has its own story and dominant theme from Q1. For stocks, it’s the longest stretch of more new lows than new highs since the financial crisis. For bonds, it’s that yields around the world are moving to their highest levels in years (US & German yields get a lot of attention, but don’t overlook the Japanese 10-year yield breaking out after six years of moving sideways). For commodities, the story is about an asset class that has been overlooked by a generation of investors and financial planners making the case that it deserves to be part of the conversation. As investors we are well-served by allowing dynamic weighting to be part of the asset allocation process. Having all options on the table is an important first step before settling on specific exposures.
