Neutral positioning amid uncertainty (with Guy, Anna, Tom)

Running a neutral portfolio due to high uncertainty from oil volatility, geopolitical risks, and hawkish Fed risk. Growth stocks most vulnerable to higher rates. European equities could rally if ceasefire holds, but investors are under-positioned. Skeptical on hyperscaler credit due to difficulty pricing risk. ECB likely done hiking after one-and-done.

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Invesco 8.5
Asset Manager $1000.00B
Alexandra Ivanova 8.0

Neutral positioning amid uncertainty (with Guy, Anna, Tom)

ndx

She says growth stocks are most vulnerable to higher rates and semiconductors/hyperscalers may be overpriced if Fed is hawkish. She is neutral overall but tilted away from aggressive growth.

wti

She notes oil went up and down, and the ceasefire is fragile. Geopolitical risk could flare inflation risks again.

yields

She bought the front end when hikes were priced in, suggesting she sees rate risk. She says we may be too sanguine about rate risks.

How vulnerable is your portfolio if we get a more hawkish Warsh?

Tom
Alexandra Ivanova

I've been active managing duration and moved to neutral. The inflation picture looks better with oil coming down, but we may be too sanguine about rate risks with the new Fed chair.

Volatility is still a feature, so being nimble and not taking big bets either way makes sense.
Which parts of the equity market are most vulnerable to higher rates?

Tom
Alexandra Ivanova

Growth-oriented stocks are most sensitive to higher interest rates. We are more balanced, with a tilt to European equities which have been a headwind but could rally back if ceasefire holds.

Semiconductors and hyperscalers may be a little overpriced if we get a hawkish Fed.
Why would I buy hyperscaler credit instead of equity?

Guy
Alexandra Ivanova

It's difficult to price the risk when you don't know the fundamental picture. Growth leverage and interest coverage ratios look like high-yield issuers. I'm skeptical and didn't buy the SpaceX deal.

You can do tactical trades, but valuing it is very difficult.
Is the uncertainty most acute in stocks, bonds, or credit?

Anna
Alexandra Ivanova

Everywhere. Oil went up and down, yields came up and down. In this environment, being nimble and not taking big bets makes sense.

When the market threw opportunities like pricing a lot of hikes in the front end, we bought there.
Do you think Lagarde will raise rates again?

Guy
Alexandra Ivanova

We've taken out expectations of rate hikes given oil came down to pre-war levels. ECB is one-and-done. The hike was for expectations management and anchoring inflation expectations.

I worry about second-round effects because companies are talking about passing costs to consumers.

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