Portfolio Construction Forum

The top 20 stocks comprise 63% of the ASX200, and the index is heavily skewed towards banks (20.9%) and iron ore miners (14.8%). Given the expected negative growth in the banking sector and the vulnerability of iron ore prices due to a weak demand outlook, Australian equity markets could well be anchored by the 'dinosaur seven'. With inflation at a two-year low but still well above the RBA’s target rate of 2% to 3% and rate cuts still uncertain, the outlook for Australian equity markets continues to look volatile. Investors seeking diversification, reduced volatility, and higher unique alpha over the long term should explore opportunities beyond the ASX20, focusing instead on the Ex-20 index. This index provides exposure to Australia's future rather than its past and is forecast to have 7.8% EPS growth pa over the next three years. - Dion Hershan, Yarra Capital Management. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

With Australia's residential vacancy rate at a record low and net overseas migration at a record high, it has never been more apparent that Australia needs a long-term housing solution to help expand supply. With rigorous capital provisioning models placed upon major banks following the GFC, the banks can no longer participate in the market like they used to, providing greater opportunity for real estate private credit lenders to fill the gap. This all combines to help generate attractive risk-adjusted returns for investors in the asset class. - Mark Power, Qualitas. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Second term presidents tend to be more ideologically aggressive, since they are freed from the need to face voters again. At a minimum, a Trump 2.0 administration would likely boost traditional energy, defence, and financial services, among other sectors which would benefit from lighter regulation. Meanwhile, Trump's "America First" trade policies could be inflationary and further increase US tensions with China, given Trump's promise to revoke China's Most Favored Nation trade status it has enjoyed since 2001. Investors globally need to think through the implications of a second term for either candidate. - Libby Cantrill, PIMCO. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

It's the year of the vote. A record-breaking 40-plus countries - some two billion people (more than 40% of the world’s population) representing over 60% of global GDP - will hold national elections in 2024, more in a single year than ever before. Yet authoritarianism and illiberal ideas are on the march globally, driven by the rise of strongman autocrats such as Vladimir Putin and Xi Jinping, and identity politics in the West. In such an environment, deglobalisation of the world economy, which accelerated during the Covid-19 pandemic, seems set to continue, exacerbated by supply chain challenges that echo past lessons unlearned. In the context of a challenging environment for liberal democratic societies, investors must understand the geopolitical, social and economic forces influencing the outlook for investment markets. This panel session features three investment experts, each offering and debating a high conviction thesis on a long-term, deep rooted structural change impacting markets over a decade or more - Oliver Hartwich, Chris Rogers and Vikram Mansharamani. Earn 1.00 CE/CPD hrs on Portfolio Construction Forum

The bulls are back in charge of markets, as investors dream of a happy ending to the seismic dislocation following the global pandemic. Yet, for those willing to look beyond the headline economic data, a more uncertain outlook emerges. In the US, the disconnect between real GDI and real GDP rhymes with the period preceding the Global Financial Crisis. And, there’s the very real chance that history will in fact repeat and deliver a second Trump presidency later this year. Along with heightened global geopolitical risks, the Axis of Autocracy, reduced fiscal support from governments, a deflating Chinese property bubble, and an ongoing US commercial real estate crisis, 2024 is a year for investors to be nimble and tactical. There will be sensational trading opportunities for those able to navigate the risks hiding in plain sight. - Jonathan Pain, The Pain Report. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

The COVID pandemic was a natural disaster, yet the two-pronged stimulus response of monetary and fiscal policies was designed for an economic crisis worse than the GFC. The combination of the pandemic and the policy response resulted in a surge in economic and inflation volatility from 2020 to 2023. We are now entering a new phase where this economic cycle will mean revert to a traditional business cycle - a cycle that may not exactly repeat but will rhyme with prior inflation cycles. Opportunities exist in global bonds in 2024 and 2025 no matter hard or soft landing outcomes – including US Treasuries, US Agency MBS passthroughs and select local currency emerging market bonds in Latin America. - Jack McIntyre, Brandywine Global.  Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

There's no such thing as "normal" for supply chains. The challenges for 2024 and 2025 that have echoes in the past include logistics network disruptions, geopolitical risks and the cash costs of environmental policies. That makes investing in supply chain security more important than ever. However, there's evidence that firms are scaling back spending on two of the three most important resilience-building measures. Companies' under-investment in supply chain resilience doom them to repeat past disruption failings. - Chris Rogers, S&P Global Market Intelligence. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

The term “BRICS” was coined in 2001 and, since then, BRICs nations’ share of Global GDP (PPP) has surpassed that of G7 nations. Today, certain developing economies (Vietnam, Indonesia, India and Brazil) are set to continue the trend of economic catch-up. These economies are still on low levels of income per capita, and growth is driven by sound economic policies, strong balance sheets and a reconfiguration of the global supply chain. A declining US dollar and interest rates has also been a boon to EM equities. Equity valuations are at attractive levels for most emerging markets but the lack of interest in emerging markets in general has led to extraordinarily attractive valuations even though the top companies are growing persistently. History may not repeat, but often rhymes. Historically, such extreme valuations have led to outperformance over the longer term - for example, coal a few years ago, US equities during the GFC, and banks when the consensus believed that interest rate was staying at zero forever! - Joseph Lai, Ox Capital Management. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

There's much to learn from history, but every time is different when it comes to markets. Inflation in the 2020s has been very unlike that of the 1970s. The inevitable recession that did not occur was likely prevented by unprecedented fiscal stimulus. Going forward, short-term interest rates will likely fall, but long-term rates might rise. Equities are unlikely to revisit the frothy heights of 2021 and market breadth should widen. As cyclical inflation subsides, structural price pressures driven by reglobalisation and the energy transition will collide with the deflationary force of AI. The backdrop for investing will require investors to identify how the outlook today intersects with our experiences of the past and where it differs. This time is different because every time is different. - Ronald Temple, Lazard. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

What a difference a year makes. In February 2023, investors were preoccupied by the risks of rising inflation, monetary tightening and recession. This year, the focus is on disinflation, monetary easing and economic growth. The US economy remains resilient, and the Federal Reserve will likely ease policy in 2024 as inflation declines. The European Central Bank will also cut rates, boosting eurozone growth in the second half of the year. The outlook is more challenging in China, where the economy remains hindered by structural problems in the property sector. However, the generally bullish macro backdrop favours equities over fixed income. Portfolio construction practitioners should not let heightened geopolitical risks cloud what is otherwise a positive outlook for markets. - Ronald Temple, Lazard on Portfolio Construction Forum