Colony Market Review & Investment Outlook

February 2023

In addition to a one-page executive summary, our most recent Investment Commentary includes a review of recent financial market results, our assessment of the macro backdrop, and an update on portfolio strategy. Here’s an overview:

  • 2022 proved challenging for most asset categories as financial markets battled several headwinds, including high inflation, hawkish central banks, the Russia-Ukraine war, and lockdowns in China.
  • The broad equity market sell-off improved valuations, but US stocks may not be adequately discounting the risk of a decline in corporate earnings—although a US recession is widely anticipated by economists. A mild recession within the next 12 months is also our base case assumption, but it’s not a certainty given the strength of the labor market.
  • To combat inflation, the US Federal Reserve has pursued one of its most aggressive rate hiking cycles on record. Bond yields have returned to levels not seen since 2008, indicating better forward-looking returns. However, the uncertain macroeconomic environment and geopolitical backdrop suggests that volatility across asset classes will remain elevated.
  • Proper portfolio diversification remains as important as ever. In terms of tactical positioning, we maintain a slight underweight position in core/investment grade bonds, but recommend increasing exposure given recent weakness and compelling yields. We continue to target an underweight position in US large cap stocks, but remain fully invested in more attractively valued international stocks. We also continue to target an overweight position in real assets like commodities.

Click here to read the full commentary.