Investment Committee – February 2024
Expert Perspectives: A Dialogue with WisdomTree
This month we had the honour and the privilege to host representatives of global financial exchange-traded-product manager WisdomTree to our Investment Committee meeting. WisdomTree executives shared with us valuable insight on financial structuring and we exchanged views on the prospects of capital markets and the economy.
Ιnvestment Strategy and Market Analysis
Alignment of Investment Strategies: The meeting kicked-off with KM cube describing how such meetings warrant a need for a unified investment approach, avoiding contradictory positions (e.g., long and short on the same currency) across different portfolios. This is to ensure cohesive management of third-party assets, and we highlighted the importance of regular communication among investment managers.
Market Performance and Strategy: Observations were shared on recent market dynamics, predominantly the S&P 500 reaching new highs. The discussion reflected on the difficulty of identifying compelling investment opportunities beyond the previously successful strategies, particularly after the recent success of technology stocks after the short crisis of US mortgage banks and the fallout of Credit Suisse last year.
Adaptation to Market Changes: Members’ narrative included a cautionary tone about market corrections and the strategies that have rebounded since the COVID-19 pandemic. It also addressed the conservative approach adopted in the past two years, which, while cautious, impacted portfolio performance due to not fully capturing the market’s upward trends.
Going forward, we still see the US keeps buying growth with massive deficits, and not only does this strategy require ever bigger debt to remain sustainable, it’s also that the last remaining liquidity facility from the Covid money-printing operations is set to expire by the end of the first quarter 2024.
Hence, not this month, but more likely by the second half of this year ultra-easy fiscal and overly tight monetary policy might switch places. Either way, at some point we will see a substantial correction. And the extent of how orderly/disorderly this proves will frame that post-event market environment.
The Investment Committee suggest clients remain in positive carry trades, riding the trend until a clear reversal lower. As vividly mentioned, ‘Don’t stop dancing if the music hasn’t stopped’.
WisdomTree Core Market Outlook
Emerging Markets and Geographical Focus: Specific attention was paid to Japan and emerging markets. Japan’s performance was attributed to structural factors, such as government initiatives to deploy savings into the economy and corporate governance reforms. Emerging markets were discussed in the context of supply chain restructuring benefiting countries like Vietnam, Indonesia, and India, alongside a nuanced view on China’s market dynamics.
Sector and Thematic Investments: The discussion shifted to sector-specific and thematic investment strategies, emphasizing quality and growth sectors in Europe and the U.S. Thematic investments in areas like AI, cybersecurity, and cloud computing were highlighted.
WisdomTree on Digital Assets and Commodities
Digital Asset Integration: Cryptocurrencies were discussed as increasingly mainstream investment assets, with a focus on Bitcoin and Ethereum. The conversation touched on the strategic inclusion of digital assets in portfolios and the operational nuances of cryptocurrency ETPs (Exchange Traded Products).
Commodities for Energy Transition: The role of commodities, particularly metals critical for the energy transition (e.g., lithium and cobalt), was discussed. Products tailored to the energy transition, emphasizing the strategic importance of certain metals, were highlighted as unique offerings.
A special thank you goes to Alberto Galante, Andrea Moro and Pierre Debru from WisdomTree, for their valuable contribution to our February meeting.
Authors: John Couletsis and Kostas Metaxas