Bob Homan

Our most significant change this quarter is the reduction in the equity weighting, which was implemented at the end of October. The initial overweight of stocks versus bonds had become significant due to the sharp rise in the stock market. The same sharp rise in prices, driven by earnings growth, coincided with rising interest rates, leading to firm valuations and low risk premiums. We anticipate limited further growth and have adjusted our strategy accordingly. Our current position remains slightly overweight equities.

Our primary conviction is that the US offers a more favourable environment for equities than Europe. This reflects our preference for growth stocks and sectors. Our portfolio is currently positioned with a greater allocation to growth sectors, including information technology and communication services, while maintaining a relatively smaller position in value/defensive sectors, such as utilities and healthcare. 

The overweight position in growth sectors is primarily driven by the robust earnings growth outlook, underpinned by the AI boom. In the fixed income sector, our strategy is to overweight corporate bonds and underweight government bonds. Our corporate bond portfolio includes a significant allocation to mortgage-backed securities and asset-backed securities.

In contrast with the approach taken by many asset managers, who tend to underweight the Magnificent Seven due to their already significant weighting in the indices, we have opted to overweight six of these seven. We are underweight Tesla in today’s portfolios.

This is not a book or podcast, but rather a music album. I would suggest that those with a penchant for rock music consider British rock band Judas Priest. Their 2024 album, entitled Invincible Shield, is worthy of particular attention. It is encouraging to see Judas Priest has retained its relevance 50 years after the release of its debut album. I am confident that this album will be included in numerous lists of the best heavy metal albums of 2024. This provides me, as a now slightly older worker/investor, with the inspiration and confidence to continue competing with younger colleagues.