Equity
markets
have
had
a
good
start
to
the
year,
with
the
S
&
P
500
benchmark
crossing
5,000
earlier
this
month
and
Europe’s
Stoxx
600
index
hitting
an
all-time
high
.
The
benchmark
10-year
Treasury
yield
,
meanwhile,
is
hovering
around
4%
after
topping
5%
last
October
for
the
first
time
in
16
years.
Looking
ahead,
market
consensus
sees
“a
perfect
combination
of
bullish
factors,”
according
to
Wells
Fargo
Investment
Institute’s
Paul
Christopher
—
but
he’s
not
so
sure.
“We
expect
sticky
inflation,
a
slowing
economy,
fading
Treasury-provided
liquidity
and
[more]
aggressive
policy
easing
than
the
equity
market
consensus,”
Christopher,
head
of
investment
strategy
at
the
institute,
told
CNBC
Pro
earlier
this
month.
As
investors
ponder
how
—
and
where
—
to
invest
in
this
uncertain
climate,
CNBC
Pro
asked
market
experts
where
they
recommend
allocating
$100,000.
Moving
away
from
60/40
Kevin
Teng,
CEO
of
Wrise
Wealth
Management
Singapore,
which
serves
ultra-high-net-worth
individuals
across
Asia,
the
Middle
East
and
Europe,
advised
investors
to
reconsider
the
traditional
portfolio
allocation
of
60%
to
equities
and
40%
to
bonds.
“Investors
need
to
understand
what
kind
of
market
we
are
in
when
allocating
funds
because
cycles
change,
and
they
change
very
fast,”
he
told
CNBC
Pro
“Investors
with
a
60/40
portfolio
allocation
would
have
suffered
quite
a
lot
because
of
how
high
long-term
bond
rates
have
been.
It
is
also
not
ideal
in
an
environment
when
rates
cuts
are
expected
because
the
returns
from
the
overall
portfolio
would
not
be
as
strong.”
The
market
is
expecting
the
U.S.
Federal
Reserve
to
cut
interest
rates
this
year,
although
the
timing
of
such
cuts
remains
uncertain.
The
CME
FedWatch
tool
suggests
the
first
reduction
is
expected
to
happen
as
early
as
June.
For
Teng,
allocating
around
80%
to
equities
,
15%
to
bonds
and
5%
to
cash
holdings
should
yield
“better
investment
returns”
than
the
traditional
portfolio
split.
He
recommended
investing:
$40,000
in
U.S-listed
equities
like
Microsoft
or
exchange-traded
funds
(ETFs);
$30,000
in
stocks
that
the
investor
has
a
“home
bias”
in;
$10,000
in
short-term
fixed
income
through
a
bond
fund
or
an
ETF
with
exposure
to
bonds;
$10,000
in
cash,
given
that
it
is
“super
liquid”
and
“will
continue
to
give
more
attractive
returns
than
bonds”
as
well
as
T-bills;
$10,000
to
emerging
markets,
such
as
Asia.
“Asia
…
is
becoming
more
important
and
I
think
we
are
going
to
see
more
capital
come
over
not,
just
from
the
U.S.
but
also
Europe
as
more
family
offices
—
which
have
traditionally
allocated
to
the
U.S.
—
look
at
it,”
the
wealth
manager,
who
was
previously
an
executive
director
of
private
wealth
management
at
Morgan
Stanley,
said.
Investing
around
market
runs
Christopher
suggested
that
investors
with
a
mid-range
risk
appetite,
seeking
capital
preservation
and
growth,
balance
their
portfolio
by
“putting
cash
to
work
in
short-term
fixed
income
and
U.S.
large-cap
equities.”
He
also
favors
commodities,
along
with
the
industrials,
materials,
energy
and
healthcare
sectors.
His
comments
came
with
a
dose
of
caution
about
the
recent
stock
market
rally,
however.
“The
further
[the
S
&
P
500
]
runs
the
more
serious
the
question
of
whether
future
earnings
are
completely
priced,”
he
said.
“The
consensus
believes
that
profitability
is
not
yet
completely
priced,
but
no
one
really
knows
where
that
point
is
—
or
whether
we’ve
overrun
fair
pricing.”
Cash
and
fixed
income
Rickie
Jia,
head
of
discretionary
portfolio
management
multi-asset
and
management
Asia
at
Pictet
Wealth
Management,
also
strikes
a
note
of
caution
on
U.S.
stocks,
saying
the
market
looks
to
have
“a
lot
of
risks”
right
now.
“By
investing
purely
in
cash
and
fixed
income,
you
can
already
get
a
decent
return,”
Jia
said.
“So
for
example,
today,
if
you
allocate
to
a
global
investment
grade,
you
get
close
to
6%
yield
alone.
And
with
global
central
banks
cutting
rates,
fixed
income
will
likely
benefit
from
capital
gains
as
well
because
of
the
duration.”
Within
fixed
income,
Jia
likes
government
bonds
from
developed
countries
and
investment-grade
bonds
from
“reputable
firms,”
which
offer
“quality”
and
“longer-term
growth”
potential.
On
equities,
he
is
underweight
U.S.
stocks
given
their
“stretched
valuations”
but
remains
constructive
on
European,
Japanese
and
Asian
counters.
Jia
also
stressed
the
importance
of
investors’
allocating
to
asset
classes
depending
on
their
risk
appetite
and
life
stage.
Investors
nearing
retirement,
for
instance,
should
have
a
more
conservative
portfolio
mix
of
80%
in
fixed
income
and
20%
in
equities,
according
to
Jia.
Conversely,
he
said
younger
investors
growing
their
capital
should
look
to
invest
70-
75%
in
equities,
20-
25%
in
fixed
income,
and
potentially
a
small
allocation
to
commodities.
Go
for
gold
Beyond
the
traditional
sectors,
the
pros
also
see
promise
in
gold,
as
demand
remains
high
and
central
banks
add
more
of
the
precious
metal
to
their
reserves
.
“We
are
advocating
for
gold
[because]
you
want
to
buy
tangible
assets,”
Wrise
Group’s
Teng
said,
adding
that
gold
offers
long-term
returns
at
a
time
of
still-high
inflation
levels.
Spot
gold
prices
are
up
around
11%
over
the
last
12
months.
Pictet’s
Jia
agrees,
saying
that
allocating
a
small
percentage
to
gold
would
be
a
good
strategy.
“We
think
it
will
continue
to
help
make
the
portfolio
more
defensive,
and
hedge
against
inflation,”
he
said.
