Key Investment Perspectives: June 2019
June’s edition of Key Investment Perspectives focuses on the sober reminder that volatility is the new normal.
Read this month’s report as we delve into unpredictability—more specifically, the geopolitical policies and economics creating volatility. We’ll explore the escalating US-China trade war after a break down in negotiations, the troubling bond market news as credit spreads widened, the case for hedge funds and low volatility equities to combat volatility, a rough month for commodities highlighted by the collapse in crude oil prices (-16.3%), and our recommendations for combating market uncertainty.
- Global Equities: On the heels of an all-time high in April, the US equity market fell 6.5%, forecasting continued volatility that will linger as we approach the 2020 election. Developed markets dipped 5.0%, yet still outperformed US for the first time this year. Emerging markets were down 6.2%-- China being the biggest detractor (-12.8%) due to US trade hostilities.
- Fixed Income: The US 10-Year Treasury note collapsed by 38 basis points (bps), while the yield curve inverted by 21bps. The collapse in yield was even more pronounced elsewhere, with the 10-year German and Greek government bonds falling to all-time lows.
- Tactical Allocation: We maintain a modest overweight to equities, with an overweight to the US, underweight to developed ex-US, and an underweight stance for emerging markets. An underweight to bonds is recommended, especially limiting exposure to high-yield bonds. We are also introducing low volatility equity strategies this month to reduce turbulence in our equity portfolios.
About Bola Olusanya
Bola Olusanya has more than 20 years experience in investment management as both an executive and thought leader. As Managing Director of Asset Allocation and Portfolio Strategy with Key Private Bank, Bola applies his expertise to direct Key Private Bank’s third-party manager research efforts, oversee the group’s portfolio construction efforts, and design an asset allocation methodology applicable to all stakeholders.
Bola received an MBA with a concentration in finance from Emory University and an MS in computer science from the University of Lagos. He is known for his quantitative expertise, his extensive knowledge of the full spectrum of asset classes, and his ability to mentor and manage high-performing investment teams.