Mike brings deep expertise in economic and market analysis to RBC BlueBay. In his newly created position, he will provide comprehensive analysis of the global economy and deliver actionable market insights across all investment asset classes to clients and prospects.
His insights complement our existing extensive client engagement, enabling us to deliver enhanced value and nuanced market perspectives to the institutions we serve.
For enquiries about market analysis, economic insights, or to discuss how RBC BlueBay can support your investment strategy, reach out to your sales contact.
Hi, I'm Mike. I'm the new head of market strategy here at RBC BlueBay Asset Management. My goal in this role is to help you navigate the economic outlook and the implications for markets. I'm going to be doing that via thought pieces, webcasts, regular posts on LinkedIn, as well as hopefully meeting with many of you in person to discuss the markets.
Enough about me. There's obviously a lot going on in the world at the moment. How should investors think about all the uncertainty that's out there? I think, first and foremost, it's important to accept that wars are inherently unpredictable. In times of uncertainty like this, how can investors actually think about managing portfolios? I think that there's a few key considerations.
Firstly, at times of uncertainty, it makes sense to reduce active risk. That means making sure that bets relative to benchmark aren't so extreme that if markets move violently in one direction or the other, it could risk harming relative performance.
Secondarily, I think about asymmetries. For example, one might look at the expected return over the next two to three years from high yield compared with US equities. If like me, you think that US high yield is probably in a best-case scenario likely to give a similar return to US equities over the next few years, but in a worst case scenario, the drawdown on high yield is likely to be lower than it could be in equities, then at the margin, perhaps it makes sense to be allocating more towards an asset like high yield with that lower potential drawdown than an asset like US equities. Then I think about absolute return strategies. In periods of high uncertainty, having strategies that are able to dial their risk down a bit depending on what's going on in the world and then always be able to take more risk when the outlook becomes clearer can be a key part of investors' toolkit to help provide a buffer to protect portfolios in these periods of economic and political uncertainty.
For what it's worth, even if and when this war comes to an end, I think we're likely now in a period where shocks, both political and climate-related, are likely to be the new norm. I think there's a structural place for absolute return strategies within portfolios.
Finally, I think it makes sense to think about where you would look at opportunities if valuations were to correct further from here. Within equities, I think the long-term growth potential is greatest in both the US and the emerging markets. It's worth thinking ahead about at what levels and under what macroeconomic conditions you'd want to start thinking about going overweight US and emerging market equities. Within fixed income, I think that both emerging market debt and high yield offer attractive long-term returns, particularly if spreads were to widen further from here, giving a more attractive entry point.
In summary, I think that at times of uncertainty, it makes sense to think about reducing active risk, asymmetries, absolute return, and then potential future opportunities. If you've got more questions or are interested in following my views as this evolves, then please reach out to your RBC BlueBay sales contact and follow me on LinkedIn, where I'll be posting regularly as this all evolves. With that in mind, I look forward to hopefully discussing this in a lot more depth with you in person in the not-too-distant future.
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