Slow and steady wins the race Slow and steady wins the race\images\insights\video\businesswoman-wooden-blocks-small.jpg April 28 2023 March 3 2023

Slow and steady wins the race

The words of the day are “caution” and “patience.”

Published March 3 2023
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Video Transcript
Question: How should investors position themselves for a volatile environment?
Steve Chiavarone: From a multi-asset perspective, we think the words of the day are 'caution' and 'patience.' We want to stay close to neutral in our portfolios. This is not, in a baseball analogy, a 3-1 count where you want to swing for the fences. It's more like a 1-2 or a 2-2 count, you want to foul off those tough pitches. So that means, a relatively neutral to slightly overweight allocation in stocks versus bonds. On the fixed income side, cash is an asset class where yields are quite robust right now and offer attractive yields at this point. In addition, as you start to go further out the curve, we're more neutral in duration, having closed a large, short-duration call. But we do find ourselves cautious on the credit front. We are underweight in investment grade corporates, we're underweight in high-yield. We do, however, see some opportunities in EM debt where some of the spreads have been attractive. Moving over to equities, a similar theme. We've gone overweight non-U.S. equities, both developed and emerging for the first time, really, in a couple of years. On the idea that we're starting to see the dollar weaken a little bit, we're starting to see China reopen, and we're starting to see green shoots in some of those economies coming from that. In the U.S., it's the defense on the field. So we prefer defensive dividend paying equities that have some protection, and have lower beta, and a little bit less risk to ride out the storm. So when we think about a portfolio, it's one where you're not taking huge bets on either side. You're prepared to be defensive with little pockets of offense where they present themselves at attractive valuations.
Tags Equity . Fixed Income . Active Management .

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Effective Duration: A measure of a security’s price sensitivity to changes in interest rates. One of the methods of calculating the risk associated with interest rate changes on securities such as bonds.

Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices.

International investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards. Prices of emerging-market and frontier-market securities can be significantly more volatile than the prices of securities in developed countries, and currency risk and political risks are accentuated in emerging markets.

The value of equity securities will rise and fall. These fluctuations could be a sustained trend or a drastic movement.

There are no guarantees that dividend-paying stocks will continue to pay dividends.

Beta: A measure of the volatility, or systematic risk, of a security or a portfolio, in comparison to the market as a whole.

Federated Global Investment Management Corp.