‘Not a time for major calls’: Six multi-asset managers explain their Q4 positioning

Six investors outline their thoughts on markets for the final quarter of the year and beyond

Niall O'Sullivan, Andrew Lake, Scott Berg, Philip Collins, Nick Greenwood and Robert Tipp
From left: Niall O’Sullivan, Andrew Lake, Scott Berg, Philip Collins, Nick Greenwood and Robert Tipp


After an incredibly tough environment last year, investment markets and the broader global economy have been relatively resilient over the course of 2023.

But while most risk assets have managed to deliver positive real returns so far this year, the broader backdrop remains challenging – as the full impact of central bank efforts to clamp down on inflationary pressures has yet to be felt.

In the face of ongoing uncertainty, six investors outline their thoughts on markets for the final quarter of the year and beyond.

Not a time for major calls

By Niall O’Sullivan, chief investment officer, multi-asset strategies, EMEA at Neuberger Berman

We have greeted this year’s equity market rally with some trepidation. While strategic asset allocations have done well, we have been cautious as equity markets appeared to diverge from economic fundamentals.

Initially, each month of divergence increased our concern about market levels, especially as investors were being paid to be patient by cash and short-term bond yields. Eventually, however, the balance between tactics and strategy made us recognise the near-term momentum was too strong to fight against, even as we held onto our medium-term outlook. By mid-year, we were shifting to neutral. But a ‘neutral’ view does not mean a portfolio has to be static.

What can be done to eke out incremental excess return opportunities? One place to look is within, rather than among, asset classes. For example, in equities, regional tilts can be explored. Japanese equities still appear attractively valued in a policy environment that remains very accommodative next to other developed markets, even after the Bank of Japan’s recent adjustments to yield-curve control.

No free lunch from here

By Andrew Lake, head of fixed income at Mirabaud Asset Management

The big danger right now is that inflation does not come down. Given people are not losing their jobs and consumers continue to spend, we must at least consider the scenario that inflation does not fall as quickly as expected.

One consequence of this would be the Fed continues to hike rates and a potential policy error occurs as they overtighten into a market that is already weakening – triggering a recession. The Bank of England could be going this way.

Overall, it is a tough environment and views are quickly flip-flopping between bull and bear. Right now, the government bond bears seem to be winning with forecasts of a ‘Goldilocks’ scenario and no recession. But the flip side of that is higher treasuries, which would cap equity market performance, so sadly there is no free lunch for investors with either scenario.

Expect greater market breadth

By Scott Berg, portfolio manager of the T. Rowe Price Global Growth Equity strategy

Equity markets have performed well this year, but much of the gains have been concentrated in US mega-cap technology stocks.

In our view, rapid technological change, Covid, and geopolitical conflict are creating the setup for a bumpy ride going forward, where grinding out returns will be important. Markets will increasingly reward those companies that can withstand an economic decline and maintain or expand profit margins.

With the era of low interest rates, low taxes, low wage growth, cheap commodity prices, easy technological gains, and deflationary globalisation now passed, this will have implications for profit margins for all companies. While the first eight months in 2023 have somewhat hidden this theme, as mega‑cap technology companies have exerted a strong influence on equity returns, this narrowness will inevitably fade to create greater market breadth.

Bonds again present value

By Phil Collins, CIO, multi-asset at Sarasin & Partners

Rather than looking to China, global equity markets have fixated on the hype around generative artificial intelligence (AI). This has bid up a small number of technology companies into what could be a mini asset bubble. Just seven stocks account for the lion’s share of the rise in the S&P 500 this year.

For the first time in many years, we find that bonds present attractive value. Corporate bond spreads are attractive relative to historical levels, while government bonds are close to fair value in the US, Europe and UK. Higher yields, resilient company earnings and strong balance sheets make good-quality corporate bonds a viable alternative to equities, and we have been adding long-term income generators to the portfolios.

The higher returns now available on bonds prompt a rethink of the pros and cons of holding alternatives. As well as offering competitive returns, carefully selected bonds can also provide better liquidity and lower risk profiles than some alternative investments. Even cash is coming into its own once again, with low risk returns able to compete with absolute return strategies.

The golden trust opportunity

By Nick Greenwood, manager of MIGO Opportunities plc

The investment trust sector has recently witnessed a perfect storm in recent weeks, as a number of factors coincided to trigger a rapid widening of discounts across the entire space. We have reached the point where many commentators are suggesting recent events have sounded the death knell for investment trusts. This is a call that we have heard many times over the decades, but the sector continues to evolve.

A fundamental reason why the trust sector should prosper is that asset classes such as property, private equity and shipping cannot operate within an open-ended fund. It would be impossible to sell a fraction of an office block or a containership within twenty-four hours to meet a client sale.

We firmly believe we will look back at the summer of 2023 and reflect that it represented a golden opportunity to buy discounted investment trusts.

Boon for yield-curve strategies

By Robert Tipp, chief investment strategist and head of global bonds at PGIM Fixed Income

Interest rates have just migrated from a decade of ultra-low levels back to what may be a sustained period back ‘home’ in their long-term 3-5% range. The renewed higher level of yields should easily support investment grade returns in the mid-single digits, with high-single-digit returns likely on the higher-risk sectors – such as high yield corporates and hard currency emerging market debt.

Rather than a harbinger of recession, the inverted yields of many DM markets suggest investors’ collective psyche remains anchored in the low-rate era, convinced that rates will be lower in the near future. Just as investors never caught up with the 40-year secular decline in rates, the inverted curve could be with us for some time, leaving a boon for yield-curve strategies.

Furthermore, with the vast majority of rate hikes behind us, market volatility is set to fall. A re-emergence of the ‘search for yield’ is likely to follow, providing a tailwind for spread product and further boosting returns.

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