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Sunday, February 5, 2023

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Global Tactical Asset Allocation – Fixed Income, Second Quarter Update

Courtesy of Tyler Durden

From Damien Cleusix, Second Quarter Fixed Income update.

After having covered our short risk asset position (equities) and taken a long position at the end of January and early February, we have started to sell our long position and build a short position 10 days ago. By this Tuesday our position was finalised with a net 60% short position.

We can only stress that there have rarely been as many hidden headwinds and that a bad surprise is almost certain in the days to come. Be prudent.

We would be extremely prudent on commodities and commodity related currencies, sell the remaining high yield and emerging market bond positions. It is a very hard decision to take but, often, hard decisions are those who pay off.

The cyclical models remain in buy so the short position will be covered when breadth become very oversold and investors fearful. A new short position will be entered if we rebound and the circumstances are similar to the current one or if the markets fail to rebound from oversold and our cyclical models turn negative.

The quantitative models (asset allocation and stock portfolio with tactical overlay) have continued to perform well in the current environment.

 

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