Stay focused on relative value - VP April 2024 Asset Allocation Discussion

Highlights from this month's Asset Allocation discussion:

• The consistently contradictory nature of this macro environment emphasizes the need to focus on relative value.
• Equities: The S&P 500 is at fair value as US large cap equities correctly anticipated the strong US growth environment, making inventory cycle beneficiaries the best relative value play on US growth upside in our view. Globally, we would be overweight Brazilian equities given their alignment with the long term capital cycle and upside leverage towards the ongoing global growth rebound.
• Fixed Income: MBS still offers the best relative value in the US as credit seems priced to perfection. Globally, we like exposure to Australian bonds via flatteners due to the relatively clean economic and policy outlook.
• Commodities: The cyclical and structural outlook has not changed for real assets, which remain our highest conviction and largest overweight. Tactically, things have become stretched, creating an opportunity to trim and take profits.