This 'market irony' is key reason why Janus' Multi-Asset Macro Investing Head likes cash right now
Speakers
Michael Contopoulos
— Director of Fixed Income, Richard Bernstein Advisors
Summary
Michael Contopoulos of Janus Henderson discusses holding 7% cash due to uncertainty and attractive yields, while expecting the 10-year Treasury yield to rise to 5% or higher. He maintains a cyclical tilt favoring industrials and materials, and is overweight emerging markets excluding China.
- Portfolio is 7% cash due to uncertainty and 5% cash yields.
- Expects 10-year Treasury yield to rise, possibly to 5% or 5.5%.
- Maintains a cyclical bent, favoring industrials and materials.
- Overweight emerging markets excluding China.
- Sees asymmetric risk in the rates market.
- Reduced exposure to Europe and Japan.
Trade Ideas
Holding cash at 7% for volatility.
Raising cash to 7% across portfolios due to uncertainty around Iran, inflation, and potential rate volatility, while maintaining a cyclical bent in equities. Cash earns ~5% and provides dry powder to deploy opportunistically during market drops.
10-year yield to 5% or higher.
The 10-year Treasury yield is going higher, possibly to 5% or 5.5% if the Fed cuts rates into a strong economy with rising inflation and ample credit availability. If the Fed holds or hikes, yields will range between 4.4% and 4.6%.
Industrials outperform, like the sector.
Likes industrials sector; small and mid-cap American industrial companies have outperformed the Nasdaq over the last 10 years. Sees cyclicality and positive momentum in earnings.
Materials have positive earnings momentum.
Materials is another cyclical space with positive momentum in earnings, making it attractive alongside industrials.
Bullish on EM ex-China.
Overweight emerging markets excluding China; underlying fundamentals are good, and the space has benefited from chip momentum and commodity exposure. Has done well as rates rose from 390 to 460.
