Janus Henderson: Global Perspectives: PCS Team offers shock therapy for market turmoil

In this edition of our Global Perspectives podcast series, the Portfolio Construction and Strategy (PCS) Team discusses key insights from their latest Trends and Opportunities report, entitled “Shock Therapy.” Global Head of PCS Adam Hetts moderates the conversation with two of the team's Senior Portfolio Strategists, Lara Reinhard and Sabrina Geppert.

Key takeaways:

• • A trifecta of severe shocks – decade-high inflation, extreme interest rate volatility, and slowing growth – has left few places for investors to hide in 2022.
• • The sell-off in both stocks and bonds has led some to question whether the diversification benefits of the 60/40 portfolio are still intact. We don’t think the 60/40 is dead, but we do think it needs some changes.
• • While we acknowledge the pain that has been felt this year, we also recognize that the current period comes at the end of a decade-plus of exceptional market strength. We believe investors should view the current landscape as a blank slate and seek to take advantage of new opportunities.

IMPORTANT INFORMATION

Actively managed portfolios may fail to produce the intended results. No investment strategy can ensure a profit or eliminate the risk of loss.
Alternative investments include, but are not limited to, commodities, real estate, currencies, hedging strategies, futures, structured products, and other securities intended to be less correlated to the market. They are typically subject to increased risk and are not suitable for all investors.
Commodities (such as oil, metals and agricultural products) and commodity-linked securities are subject to greater volatility and risk and may not be appropriate for all investors. Commodities are speculative and may be affected by factors including market movements, economic and political developments, supply and demand disruptions, weather, disease and embargoes.
Diversification neither assures a profit nor eliminates the risk of experiencing investment losses.
Environmental, Social and Governance (ESG) or sustainable investing considers factors beyond traditional financial analysis. This may limit available investments and cause performance and exposures to differ from, and potentially be more concentrated in certain areas than, the broader market.
Emerging market investments have historically been subject to significant gains and/or losses. As such, returns may be subject to volatility.
Fixed income securities are subject to interest rate, inflation, credit and default risk.  The bond market is volatile. As interest rates rise, bond prices usually fall, and vice versa.  The return of principal is not guaranteed, and prices may decline if an issuer fails to make timely payments or its credit strength weakens.
Foreign securities are subject to additional risks including currency fluctuations, political and economic uncertainty, increased volatility, lower liquidity and differing financial and information reporting standards, all of which are magnified in emerging markets.
Growth stocks are subject to increased risk of loss and price volatility and may not realize their perceived growth potential.
Technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. A concentrated investment in a single industry could be more volatile than the performance of less concentrated investments and the market as a whole.
U.S. Treasury securities are direct debt obligations issued by the U.S. Government. With government bonds, the investor is a creditor of the government. Treasury Bills and U.S. Government Bonds are guaranteed by the full faith and credit of the United States government, are generally considered to be free of credit risk and typically carry lower yields than other securities.
Mortgage-backed securities (MBS) may be more sensitive to interest rate changes. They are subject to extension risk, where borrowers extend the duration of their mortgages as interest rates rise, and prepayment risk, where borrowers pay off their mortgages earlier as interest rates fall. These risks may reduce returns.
Value stocks can continue to be undervalued by the market for long periods of time and may not appreciate to the extent expected.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

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