A year-end summary of portfolio positioning across hedge fund strategies, private equity, and real assets, with observations on how ultra-high-net-worth clients navigated a turbulent fourth quarter.
From the original report
Selected passages from the original publication. Historical observations reflect the report's publication date, not current market advice.
1) A.I. vey! – There has been a very active debate on whether and what parts of A.I. might be in a bubble. Concerns have focused on circularity (where start-ups raise money from microchip makers in order to buy more … chips) as well as on the borrowings required to build new datacenters. At the same time advances continue and cloud capacity is largely sold out. A 10% tech share decline has largely been erased though the debate continues.
2) Fed Fluctuations – As we near a changing of the guard at the head of the Federal Reserve, views on the likelihood of a rate cut in December have swung from certainty to skepticism and back to near certainty. A seemingly hardline view at the prior meeting by outgoing chair Powell further contributed to market volatility this month, but this has been softened in recent speeches from key Fed officials including Waller and Williams.
3) Deflating Inflation Concerns – The number of job cut announcements in October hit a 22- year (ex-Covid) high according to the Challenger survey. Job openings continue to fall and wage growth has moderated. In short, the employment market is becoming moribund. While this creates risks, it is also very difficult to have a wage-price spiral with limited wage growth. Barring new shocks, the months ahead could see the end of post-Covid inflation.
Offense or defense – Valuations are still full, although speculative excesses in some areas (such as SPACs and crypto) have moderated. Layoffs are rising and consumer confidence is suffering, yet thus far economic growth has held in. Fiscal stimulus should provide a tail wind to 2026 growth and large language models hold the promise of significant productivity improvements. On balance we remain “cautiously un-pessimistic”. That said, we are also very happy to continue to own assets such as gold and US bonds that can buffer portfolios in times of volatility.
For educational purposes only; not individualized investment, tax, or legal advice. Investing involves risk, including loss of principal.
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