Trends Watch: Multi-Asset Class Strategies

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Clifton Hill, Senior Vice President, Portfolio Manager, Multi-Asset Class Strategies at Acadian Asset Management.

What is your outlook for investing?  

According to our systematic macro process which uses cross-asset signals and economic and fundamental factors to maximize returns and diversification, our forecasts for the next few months across asset classes are showing negative equities, negative bonds, positive U.S. dollar versus developed market currencies, positive emerging market currencies versus U.S. dollar, positive petroleum, and negative precious metals.

What are the greatest opportunities you see and why?

We are seeing plenty of opportunities in this challenging environment, including:

• Differences between countries from their inflation and growth dynamics, and how that affects their equities, bonds, and currencies.
• Country-central bank hiking, cutting, quantitative easing and tightening cycles, and those ramifications for assets.  
• Commodities from both the long and short perspective:
  1. How the inflation dynamic intersects with the global central banks tightening to either a soft landing or recession.
  2. Supply and demand shifts from geopolitical and weather shocks.
  3. China’s economy in either slowing or reaccelerating.

Big picture, we expect this challenging inflation dynamic to continue, which will keep volatility in equities and bonds elevated. We believe the ability to use a systematic macro cross-asset process that can go both short and long across five major asset classes (equities, bonds, FX, commodities, and volatility) to generate positive returns uncorrelated to equities and bonds provides ample opportunity over the medium to longer term.     

What are the greatest challenges you face and why?

Currently, my greatest challenge is trying to figure out how the market will react to a higher inflationary period and unprecedented speed of monetary tightening through both central bank hikes and the shrinking of the central bank balance sheets, as investors contemplate a “soft landing” versus a recession or stagflation environment.  Additionally, the potential binary outcome in the second-largest economy in the world, China, and the ramifications for the global economy and emerging markets, is a great challenge.  These issues are critically important because they will determine longer-term forecasts and prices over at least the next three to five years.   

What keeps you up at night?

Right now, a key worry is understanding those elevated levels of global inflation and what that could potentially mean for the next three to five years.  Markets and economists are not used to this environment; therefore, we will continue to see large swings in market prices, as well as massive misses in economic forecasts.  Additionally, and related, is understanding the renewed geopolitical risks and the onshoring of supply chains. 

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.