Asset Allocation 2Q24: Cruising Mode
Maintain preference for bonds over income equities given its attractive risk-reward
Chief Investment Office4 Apr 2024
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A broadening of the current market rally is coming, fuelled by loose financial conditions and economic resilience. We retain a preference for bonds over income equities given its attractive risk-reward. Investors should gain exposure to private assets to enhance risk-adjusted returns.
  • Despite the Fed’s reluctance in declaring victory in its inflation fight while maintaining overall ambiguity on policy timeline, risk assets are already off to the races
  • Investors have swiftly priced-in the eventual Fed easing this year with the S&P 500 rallying 8% and US HY spread tightening 22 bps
  • A broadening of the current rally is on the cards, driven by loose financial conditions, low interest expense ratio, favourable portfolio positioning, and US economic resilience
  • The key tactical asset allocation calls we are making for 2Q24 are:
    ➢ Asia ex-Japan equities roaring back to life; maintain overweight view
    ➢ Attractive risk-reward relative to equities; Maintain preference for IG credit in 3-5Y segment
    ➢ Seek resilience in gold amid geopolitical uncertainties
    ➢ Gain exposure to private assets for greater diversity in investment opportunities

Figure 1: Equity investors pricing-in ultra optimistic economic outlook

Source: Bloomberg, DBS


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