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Investment Strategy

Published November 27, 2023 | 10 min read time

Weekly market insights and possible impacts on investors from the Wells Fargo Investment Institute Global Investment Strategy team.

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Asset Allocation Spotlight: Positioning portfolios for a potential soft patch

  • As the economy slows, we encourage investors to focus on directional trends of economic activity. In our view, attempting to time economic setbacks or market selloffs is not a productive investment strategy.
  • We believe our current guidance will help position portfolios for near-term economic weakness and market uncertainty associated with it. As year-end approaches, now may be an opportune time to consider taking gains, harvesting losses, or rebalancing asset holdings.

Equities: Whoa, that was fast!

  • As the economy continues to weaken, we anticipate pressure on equity earnings and prices as well as range trading.
  • We would suggest trimming over-allocations to areas rated unfavorable as we approach the top end of the range. Alternatively, we would suggest adding to under-allocations to areas rated favorable as we approach the bottom.

Fixed Income: Financial liquidity declining, but still plenty available

  • The Federal Reserve’s overnight reverse repurchase facility (RRP) has become like a proxy of liquidity in the financial system.
  • After topping at more than $2.5 trillion in December of 2022, the RRP currently stands below $1 trillion as market participants are searching for other investment opportunities.

Real Assets: Growing U.S. crude inventories hitting oil prices

  • U.S. crude oil inventories have risen to a three-month high of 439 million barrels, driven by stronger U.S. production.
  • Historically, West Texas Intermediate crude (WTI) prices have had a negative correlation with inventories, which typically leads to price weakness.

Alternatives: Investor activism at seven-year high

  • Activity remains robust with investor activism reaching seven-year highs.
  • Despite inherent long bias and beta exposure, activist strategies are distinct in their approach toward unlocking value through operational improvements or corporate restructuring.

Article written by:

Investment Strategy Analyst
Investment Strategy Analyst

Global Investment Strategist
Head of Real Asset Strategy
Investment Strategy Analyst

Investment Research Analyst