2Q19 Outlook: Lift to Win

DBS CIO Hou Wey Fook shares how the barbell strategy outperforms in volatile times
Chief Investment Office17 Apr 2019
Photo credit: AFP Photo

Dear valued clients,


Despite 2018 marking the longest bull market in history, we argued that last December’s equity fallout was not the start of a bear market. Instead, we predicted a “tug of war” between the bulls and the bears would ensue, translating into a volatile, wide-ranging market.


This roadmap panned out very nicely as we saw a sharp V-shaped recovery in 1Q19. This was set in motion by the Federal Reserve’s U-turn in policy, from a hawkish to dovish stance. Positive vibes from US President Donald Trump relating to the trade war, as well as China’s policy stimulus, aided the rebound.


So, are we now at the cusp of a renewed bull market? Until we see a comprehensive US-China trade deal, including the lifting of existing tariffs, we do not see equity indices breaking out to new highs. At this juncture, we hold on to our view that this “tug-of-war” market will remain in play.


We call for portfolios to employ a barbell strategy, in which overweight exposures are taken at both ends of the risk spectrum. To validate that the barbell strategy maximises risk-reward, we went back to past periods of heightened volatility and analysed how the barbell strategy stood the test of time. You can find this analysis in the Asset Allocation section.


On the back of a now dovish Fed, we believe the recent outperformance of Asia and Emerging Markets is in the early innings. The China A-share market presents a unique opportunity, and so do Singapore REITs – an anchor investment in a barbell portfolio. We also raised the weighting on Gold to increase portfolio resilience.


Lastly, for our investment themes, we continue to seek winners in the Millennial trend. In the last quarter we talked about athleisure; now we explore the gastronomy wave that has taken over.


Do enjoy the read!



Hou Wey Fook, CFA

Chief Investment Officer

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