The world and asset prices have enjoyed declining interest rates for around 40-years but this downtrend has clearly been broken this year which has led to standout weakness in high valuation growth names. At MM we are not panicking around rising bond yields but portfolios need to be constructed with this in mind e.g. for us to buy interest rate sensitive names the entry price will need to represent standout value.
MM is bullish bond yields medium-term
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While pressing the sell button and increasing cash is certainly on the table, there are a number of important points we believe need raising and probably reiterating over the coming weeks:
- MM remains committed to a far more defensive portfolio than in previous years, we may migrate further along this path.
- This is a bad time to be playing in speculative unproven asset classes from unprofitable high valuation stocks to Bitcoin.
- We believe that being prepared to sell strength as opposed to buying dips will add the most value through 2022/23.
The markets lost confidence in central banks and this can take many months to regain hence the path of least resistance is likely to remain on the downside as the selling becomes more widespread i.e. initially it was growth stocks now we are seeing more broad-based selling and profit-taking where possible as investors get scared.
