On bears, dragons and tigers: Diversification is the best defence

IN this column, I would like to discuss how Asian assets might be impacted by the gathering risk of an economic and earnings recession in developed markets in general and our investment committee’s decision to reduce its equity allocation to underweight in particular.

Based on previous cycles, I suspect Asian equities are unlikely to escape the sell-off that usually accompanies a bear market in the US. Investors should guard against elevated inflation and tightening monetary policy by ensuring that portfolios remain diversified, actively-managed, and benefit from structures which offer downside-hedging protection

Whatever it takes

The surprisingly hawkish message from the US Federal Reserve’s Jackson Hole Economic Policy Symposium at the end of August appears to have caught markets unaware. We now know that the “pivot” and the “put” were but investor fantasy; that the Fed will now do whatever it takes to bring inflation down to its 2 per cent target; and that – inevitably – there will be pain and collateral damage, particularly to markets. The collective realisation by investors resulted in a sharp sell-off in US equity markets.