What recent investment allocation changes has your firm made?
We added some equity exposure in August and will likely add a little more soon. We’ve been overweight stocks all year and continue to see no recession and likely a continuation of the bull market. The August and September volatility hasn’t been fun, but we can’t say it wasn’t a surprise either. After the best first seven months to a year since 1997 for the S&P 500, some seasonal weakness these two months made sense.
What’s your top contrarian pick at the moment?
We like small caps. Yes, they’ve struggled the past few months, but they are historically cheap relative to large caps. Things aren’t cheap out there, but small caps are one area where investors could find a nice deal. And as the economy surprises to the upside the rest of 2023, we anticipate small caps to do quite well.
In what areas of the market are you taking risk off?
We remain overweight equities, but also remain underweight bonds. We’ve been this way all year, and bonds are still an area that we’d be underweight. To us, rates are staying higher for longer as the economy improves; this could continue to put pressure on fixed income in general.
In what areas of the market are you putting risk on?
Equities, with a focus on cyclicals and small caps. The stage is set for a strong fourth quarter rally, and we think these areas will lead.
