VP February 2024 Asset Allocation Discussion

This is the second of our new, more targeted market discussion calls. Each month, we plan to have separate calls centered around a) big picture, top of mind macro themes b) asset allocation c) global macro trade ideas and d) ad hoc single stock discussions.

Highlights from this month's Asset Allocation discussion:

• Fixed Income: There remains a tension between the longer-term structural outlook for higher yields (the Age of Scarcity) vs the cyclical peak in term premiums. We continue to see attractive value in MBS and TIPS and like adding exposure in the current backdrop.
• Equities: In the US, we likely cannot price any less cuts from the Fed this year, given the need to price in a probability of accidents/stress later in the year. We view capital scarce sectors with high duration as the best way to capture upside from a cutting cycle while staying aligned with core structural return drivers. Globally, energy, goldminers, and LatAm are our favorite equity expressions.
• Commodities: Tactical, cyclical, and structural signals have aligned to support going long real assets. Oil & gas and gold are structural winners in the Age of Scarcity.

Links to Desert Island and Asset Allocation dashboards.