①Global stock markets experienced a roller-coaster ride this week, with Asian markets and U.S. stocks affected by Trump’s remarks. Market sentiment turned pessimistic on Thursday, while oil prices surged significantly; ②Wall Street has adopted risk-averse strategies. Some reduced their growth stock positions to increase value stock holdings, others shifted to foreign exchange trading or hedging instruments, and some are optimistic about tech stocks or mid-term investment-grade corporate bonds.
Global stock markets experienced another roller-coaster ride this week as Asian markets and U.S. stocks were disrupted and reversed their strong upward momentum from the first three days of the week after President Trump announced on Wednesday evening that he would continue to take action against Iran.
Meanwhile, oil prices surged significantly on Thursday, $Crude Oil Futures (MAY6) (CLmain.US)$ with an increase of nearly 12% to $112 per barrel, surpassing Brent crude oil for the first time, which rose over 7% to $109 per barrel on Thursday.
David Royal, Chief Financial Officer and Chief Investment Officer of Thrivent, stated that the ultimate direction of market volatility remains unclear. He is currently reducing his growth stock positions, increasing his value stock holdings, and closely monitoring blue-chip stocks whose prices have fallen to seek buying opportunities.
He believes that the most inopportune time to add stocks is precisely when one should do so, as market bottoms often occur when uncertainty peaks.
Other Wall Street professionals have adopted different coping strategies. Some choose to exit risky markets, while others shift to foreign exchange trading. However, as the U.S.-Iran conflict continues, major institutions are increasing their hedging transactions.
Different Hedging Choices
Florian Ielpo, Head of Macro at Lombard Odier Investment Management, has reset his portfolio with only 40% allocated to risky assets and the rest invested in bonds, commodities, and volatility hedging instruments. He emphasized that when markets are impacted, investors need to withdraw funds.
Rushabh Amin of Allspring Global Investments believes that the impact is not directly hitting the stock market but rather transmitted through interest rates and the U.S. dollar. Repricing is the root cause of market volatility. Therefore, his most favored trading strategy is going long on the U.S. dollar, which he considers a contrarian investment.
David Lebovitz of JPMorgan Asset Management expects a bear market, with the average oil price this year potentially reaching $125, which would slow U.S. economic growth by one percentage point.
However, his most favored strategy is to hold U.S. technology stocks, as tech stocks are better able to withstand the impact of geopolitical turmoil compared to any other stocks. At the same time, he is also shorting European equities.
In addition, Matt Wrzesniewsky, head of fixed income client portfolio management at Vanguard Group, stated that the credit market has repriced but not collapsed, thanks to the underlying strength of the economy. He believes mid-term investment-grade corporate bonds offer the most value.
Editor/Doris
