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Investment Strategy

Published February 20, 2024 | 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: The risk in concentrated positions

  • Narrow market breadth across various asset groups led to wide divergences in the top- and bottom-performing asset classes in 2023.
  • Diversifying among different asset groups and within individual asset groups, along with maintaining a strategic allocation and making tactical adjustments, could be good tactics to take advantage of the variation in asset class performance.

Equities: Markets look stretched

  • Market performance and investor positioning have become increasingly concentrated in Information-Technology-related names, which dominate the NASDAQ 100 Index.
  • Investors should avoid chasing recent performance and continue to focus on the favorable-rated Energy, Industrials, Materials, and Health Care sectors on pullbacks.

Fixed Income: Attractive yields and price upside remain for low-coupon IG bonds

  • A bond’s price sensitivity is driven primarily by its maturity date.
  • Long-dated corporate bonds offer attractive yield and the potential for price appreciation should long-term interest rates fall.

Real Assets: The U.S. decides to halt LNG export permits

  • On January 26, 2024, the Biden Administration paused new approvals for future liquified natural gas (LNG) export permits.
  • While the U.S. accounts for 19% of global LNG exports, we are not expecting to see short-term impacts on U.S. LNG exports, or global natural gas prices, as the globe appears well supplied.

Alternatives: Credit markets show signs of life

  • Since the fourth quarter of 2023, private credit continued to gain traction under the backdrop of recovering credit condition.
  • We believe private credit is on a potentially promising growth path. However, short-term credit risks remain.

Article written by:

Global Investment Strategist
Senior Global Market Strategist

Taxable Analyst
Head of Real Asset Strategy
Investment Strategy Analyst

Global Portfolio and Investment Strategist