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.
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