Why this expert is buying bonds even if recession fears are overhyped

If there is one thing that has surprised (or even stumped) global asset allocators this year, it's been the resilience in the US equity market. The S&P 500, on a capitalisation-weighted basis, is up 20% this calendar year alone. And while, yes, a lot of that performance has been carried by the magnificent seven mega-cap tech stocks, the rally is slowly but surely starting to broaden out. 

We can see this in an index that looks at the percentage of S&P 500 constituents whose share prices are above their 200-day moving averages. That number rose steeply in November, suggesting this rally is broadening out (despite the arguments around less liquidity).

Wilsons Advisory's team, headed up by Head of Investment Strategy David Cassidy, caught practically all of the rally by assigning an overweight to global equities in January. As he puts it, the valuations are expensive but "you get what you pay for." He doesn't believe the economic warnings either, telling us that he believes the US economy can nail a soft landing. 

But now that stock market valuations have risen by so much, Cassidy is turning to a new asset class for opportunities. The team started buying fixed interest in October - just as government bond yields cracked 5% for the first time since 2007 - and they're expecting more to come.

In this edition of Views from the Top, Cassidy sat down with me for a wide-ranging conversation about where he is putting client cash to work in 2024. 

Timestamps

• 0:00 - Intro
• 0:25 - What stands out to you as a professional investor from 2023?
• 0:51 - Is a US recession eliminated or delayed?
• 1:23 - How has the "balanced growth" portfolio performed this year and is there anything you would have changed with hindsight's benefit?
• 2:32 - Have you been buying more global equities over 2023?
• 2:55 - Tell us about one or two big changes you made to client allocations this year.
• 4:19 - Are you still overweight quality stocks and emerging markets? How do you see both themes playing out in 2024?
• 6:07 - What is one opportunity and one risk you are keeping a close eye on for 2024?
• 7:31 - Are you buying more of the Magnificent Seven or are you buying more of the S&P 493 into next year?
• 8:27 - Is there one asset you are selling or avoiding to mitigate your exposure to the key risk you have identified?
• 9:40 - What is one thing you think that the market is getting wrong or missing?
• 11:01 - Do you have a tip or a lesson for investors heading into next year?

Learn more

Wilsons Advisory think differently and delve deeper to uncover a broad range of interesting investment opportunities for their clients. To read their latest research, visit their Research and Insights page.