Investments

Investing in US equities and European bonds

Posted by MoneyController on 23.05.2024

Multi-asset investments involve spreading assets over more than one asset class, but usually do not neglect the selection of securities for each. An example of a portfolio.

An example of a multi-asset portfolio

A multi-asset investment portfolio involves an asset allocation that is at least diversified between stocks and bonds. However, security selection is usually not limited to the allocation of assets between stocks and bonds, but also goes as far as selecting the securities to be included within the same asset class. In this regard, FONDS Professionell magazine considers the example of a portfolio of the asset manager Pimco, whose managers are Erin Browne and Emmanuel Sharef.

Slightly overweighted equities and cyclical stocks

As far as the equity component is concerned, the two managers (who in their asset al location slightly overweight their investments in equities) look with interest mainly at high-quality US large caps and also at some similar companies in emerging markets. Their interest is based on growth expectations for defensive and cyclical stocks (in the course of 2024, the managers explain, earnings declines should come to an end and could boost stock prices).

European bonds and US mortgage-backed bonds

As far as bonds are concerned, the two managers' considerations mainly concern interest rates. In particular, according to Browne and Sharef, in Europe and countries like the UK and Australia, high yields could translate into capital increases. But why can't the same be said of the US? Because growth in the US is still strong and inflation remains more persistent than in Europe. However, mortgage-backed bonds of real estate lenders remain high: their spreads are still quite high compared to the T-bond benchmark.

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