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Rebalancing Considerations & What to Watch for in Equity Markets
On the April 1, 2020, State Street Global Advisor investment experts Gaurav Mallik (Chief Portfolio Strategist), Dan Farley (CIO Multi-Asset Solutions), Esther Baroudy (Senior Portfolio Manager, Fundamental Active Equities) and George Bicher (Asset Class CIO & Portfolio Manager — Fundamental Active Equities — Emerging Markets) shared their current perspectives on global equity markets.
How investors should think about rebalancing strategies Options include starting early, delaying to avoid high-volume periods, moving in tranches, using futures and ETFs to adjust exposures, and rebalancing tactically to reflect a specific market view.
How investors should think about portfolio positioning when markets are moving at high speed This environment greatly shortens the visibility needed to forecast earnings and company prospects. However, good companies will work through this.
The next step for stabilization of markets. Real stabilization will come only when the markets begin to detect that a vaccine can be produced at scale in a known time frame.
Lessons investors can learn from China’s experience The key to understanding a stock’s prospects is profitability and growth in 2021. The market isn’t yet trading in this paradigm, but it will.
The capacity of EM countries to respond to the crisis How market liquidity evolves is important. Some EM countries have sizable levels of external debt, and we don’t want to see internal economic challenges devolve into an external liquidity crisis.
The nature of EM versus DM market response There will be vast shifts in relative performance between regions and sectors as a result of the pandemic. Until we see where and when the other side of the chasm is — EM will take a back seat to DM.
Opportunities emerging out of the crisis Because China has worked through this crisis first, we have gone from an underweight in China to an overweight. Within that move we have limited ourselves to companies that should benefit in this environment, e.g., e-commerce, gaming and on-line education.
If there is room for a bounce in value (cyclical) assets One has to be very careful in the next few months as sentiment, and therefore the market, will ratchet! A value rally is always possible.
About State Street Global Advisors
For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of active and index strategies to create costeffective solutions. As stewards, we help portfolio companies see that what is fair for people and sustainable for the planet can deliver long-term performance. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s third-largest asset manager with US $3.12 trillion* under our care.
* AUM reflects approximately $43.72 billion USD (as of December 31, 2019), with respect to which State Street Global Advisors Funds Distributors, LLC (SSGA FD) serves as marketing agent; SSGA FD and State Street Global Advisors are affiliated.
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.
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