Key Takeaways:

  • Q1 of 2023 saw positive performances for most assets, including global equity indexes, government bonds, and gold. The Federal Reserve was the driving force behind market movements, as the market shifted from “higher for longer” to “cutting sooner” in terms of interest rates.
  • Despite the buoyancy of markets, multiple leading indicators, including an internal composite, point to a slow or even recessionary economic environment in 2023. As a result, investors need to be prudent and avoid assets not priced for a risk of recession.
  • Portfolio positioning has focused on getting higher quality assets for cheaper prices, such as rotating out of a broad exposure to global government bonds to take a more targeted position in US Treasury Bonds and trimming a long-standing position in Gold to hold cash as “dry powder” for future opportunities. Additionally, the portfolio has rotated within regional Asia exposure, selling Japanese equities in favour of South Korean equities, which are believed to offer a higher growth outlook and more attractive valuation.
  • The overall strategy is to invest in assets that are priced well, offer a high risk-adjusted return, and will either benefit from or outperform during a recessionary environment, while remaining active and nimble in response to ongoing volatility throughout 2023.

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