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Investment Strategy

Published May 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 role of diversification in volatile markets

  • We believe a diversified allocation designed for a specific investment objective and risk tolerance can help investors accomplish goals more effectively than timing the market.
  • Investors can utilize tactical guidance to adjust allocations based on near-term market dislocations, thereby leveraging the current market environment without completely exiting.

Equities: Hope springs eternal

  • Chinese equities have rallied sharply on the back of hope that recent policy measures will result in sustained outperformance.
  • We believe market expectations are running well ahead of reality and that investors should use the recent strength to trim exposure to Chinese and Emerging Market equities.

Fixed Income: Fed to begin tapering balance-sheet reduction in June

  • In an effort to reduce the risk of volatility in the funding markets, the Federal Reserve (Fed) announced plans to begin tapering the pace of decline of its balance sheet starting in June.
  • The Fed could become a marginal buyer of U.S. Treasuries in the upcoming months as a result, which could also help put a ceiling on intermediate- and long-term yields.

Real Assets: U.S. Treasury volatility coincides with elevated gold demand

  • Volatility in U.S. Treasuries has been a factor that correlates with driving persistent global central-bank purchases of gold.
  • We expect central-bank demand to play an important role in supporting higher gold prices in 2024 as it now accounts for 23% of global demand.

Alternatives: Private capital recovering as macro environment evolves

  • Private capital returns continued to recover through the end of 2023, and both the Direct Lending and Infrastructure strategies were bright spots.
  • We believe a gradual rebound in initial public offering (IPO) and merger and acquisition activities as well as clarity on the future interest rate path should bode well for a continued recovery in private markets.

Article written by:

Global Investment Strategist
Senior Global Market Strategist

Global Fixed Income Strategist
Investment Strategy Analyst
Head of Real Asset Strategy

Global Portfolio and Investment Strategist