Positioning client portfolios for 2024 and beyond
Following a period of aggressive interest rate increases both in Australia and overseas, inflation has been falling – but encouragingly, economic growth has remained resilient.
Can we achieve a ‘soft landing’? Or is a less appealing economic scenario likely to unfold?
Whichever way economic growth and inflation goes, there are options to position client portfolios to respond.
The 'all weather' portfolio
The tactical approach
Betashares 'all weather' portfolio solutions
Many advisers focus on broad equity market beta at the lowest possible cost for their ‘all weather’ core. But beyond low-cost beta, how can you add value to a portfolio’s core?
Here are four funds you can add to core broad market exposures to achieve a resilient ‘all weather’ portfolio.
Australian Quality ETF
Higher quality and lower stock concentration, for a better-balanced allocation to Australian equities.
Global Cash Flow Kings ETF
An enhanced index approach to investing in companies that generate strong cash flows, to provide potential for long term outperformance compared to broad global equity benchmarks.
Int Rate Hedged Aust Investment Grade Corp Bond ETF
Cash and fixed income
A liquid, transparent, ‘all weather’ credit portfolio, providing a level of income and capital stability that might surprise you.
Australian Cash Plus Fund (managed fund)
Cash and fixed income
Make your cash work harder for you with access to an institutional grade cash solution.
Tactical positioning for particular market scenarios
The funds below have the potential to enhance performance outcomes in different economic scenarios.
This is the desirable outcome for investors, and could be favourable for both bond and equity markets. Growth equities may be best placed, including 2023’s AI winners if they can deliver on strong expected earnings growth, and previously out-of-favour emerging market and small cap growth:
In an overheating scenario, companies with pricing power may benefit from resilient consumer spending and increasing demand – in which case cyclically-tilted broad market exposures or commodity-related sectors may be well placed:
In a recession, the typical playbook has called for defensive positioning in a risk-off environment – with high-quality bonds acting as a valuable portfolio diversifier to equities:
It may be difficult to generate positive real returns in this scenario. One option is inflation-linked bonds, which are likely to appreciate on falling real rates. Gold (lower real rates reduce the opportunity cost of gold ownership) and commodities with inelastic demand may also do comparatively well: