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Welcome to the latest edition of Making Sense with Portfolio Manager, Dr Jerome Lander.

The January 2024 Dynamic Assets Making Sense webinar features Dr. Jerome Lander discussing the macroeconomic and geopolitical landscape. We also discussed the main issues affecting markets including inflation, interest rates, and economic growth amid geopolitical influences. 

You can watch an edited version of the webinar (12min 44sec) by clicking the link below.

About Dr Jerome Lander and Dynamic Asset

Dr Jerome Lander is responsible for asset allocation, fund manager selection and portfolio construction of Dynamic Asset's Goals Based Portfolios. 

Dr Lander is well-known in the institutional investment community. His 20 years of experience in asset management and investment strategy demonstrate his strong capabilities in multi-asset class investment management.

He was the Chief Investment Officer of the WorkCover insurance fund where he was responsible for managing a $12 billion institutional investment fund, reporting to the Investment Board. In that time, the investment fund ranked as the best institutional investment fund of its kind in Australia and the best performing of all Mercer’s (nearly 100) institutional clients.

Jerome has also been a Director of Investment Consulting for Russell Investments, a Diversified Assets Portfolio Manager at Credit Suisse and Head of Manager Research for Van Eyk. Jerome has also served as a Board member for the Investment Management Consultants Association (IMCA).

If you would like to find out more about Dynamic Asset's Managed Account Services under the direction of Dr Jerome Lander contact Dynamic Asset today.

Disclaimer 

This material has been prepared by Dynamic Asset Consulting Pty Limited (ABN 82 079 145 298, AFSL 502623) of Level 20, 56 Pitt Street Sydney NSW 2000. Any content provided in this Report is for general information purposes only. It is not personal advice and does not take into account the investment objectives, financial situation or needs of any person. Please seek specific advice before making a decision in relation to any investment. Before making any decision about any product you should obtain a Product Disclosure Statement (PDS) or Investment Mandate (IM) document for further information. A copy of our PDS or IM is available from your adviser or by contacting us through our website at www.dynamicasset.com.au 

The information is provided in good faith and we do not make any representation or warranty as to its accuracy, reliability or completeness. Any information contained in this presentation is subject to change without prior notice by Dynamic Asset Consulting and Dynamic Asset Consulting is not obliged to update any information. References made to any third party or their data is based on information that Dynamic Asset Consulting believes to be true and accurate as at the date of this Report but without independent verification. All information provided in this Report is correct as at the date of this Report. To the extent permissible by law, we do not accept any responsibility for any error, omission, indirect or consequential loss or damages (whether arising in contract, tort, negligence or otherwise, in any case whether foreseeable or not). Any person receiving this document should rely and act on that basis and entirely at his / her own risk. 

Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market. Returns are not guaranteed and actual returns may vary from any target returns described in this communication. Unless stated otherwise Dynamic Asset Consulting returns are net of all asset manager, program adviser and administration fees. The measure of inflation is the Consumer Price Index, calculated by the Australian Bureau of Statistics. Where the official number was not available at the time of publication a proxy CPI value has been calculated. 

Further distribution of this material is prohibited without prior permission from Dynamic Asset Consulting. 

We had mixed performances in our portfolios in September in what was generally a very weak month for asset markets, including equities and bonds. Our short-end defensive portfolios held up well, as they are designed to, while longer-dated portfolios were more exposed to the broader markets, although held up relatively well.

Dynamic Asset had strong performances across all our portfolios in August in what was a weak month generally and for our competitors. This is further evidence our strategy of diversification and differentiated assets is achieving the desired outcomes.

There were strong performances across all of our portfolios in July. We continue to emphasise genuine diversification at a portfolio level and keeping equity weightings low ahead of greater weakness in the economy and equity markets, given the significant risk of this occurring. 

We had mixed performances in our portfolios in June.  We continue to emphasise genuine diversification at a portfolio level and keeping equity weightings low ahead of greater weakness in the economy and equity markets, given the significant risk of this occurring.  History backs our position.  Chasing markets and investing too fully in fully priced risk assets ahead of higher recession risk – which appears to be the most common positioning - is fraught with risk and won’t be able to take advantage of any market weakness to boost returns from dynamic asset allocation.   There is noticeable market crowding again in large global technology names based on the ‘bubblish’ AI theme, which may lead index-like investors to significant disappointment as the year progresses, as these stocks appear to have run well ahead of earnings delivery. 

We had mixed performances in our portfolios in May. We continue to emphasize genuine diversification at a portfolio level and keeping equity weightings low ahead of a possible hard landing in the economy and equity markets, given the significant risk of this occurring. History backs our position. Chasing markets and investing too fully in risk assets at this stage of the economic cycle – as we believe many are doing - is fraught with risk and it’s likely they won’t be able to take advantage of any market weakness to boost returns when the opportunity arises.   There is noticeable market crowding again in large global technology names based on the exciting AI theme, which may lead index-like investors to significant disappointment as the year progresses as these stocks appear to have run ahead of earnings delivery.

Real economic and earnings growth will likely become weaker given current monetary policy settings and into a likely recession or softening economy at the very least. This may begin to be priced into markets as persistent central bank tightening and structural challenges impact markets with a lag. Given the macroeconomic backdrop, this would likely provide an outstanding opportunity for our portfolios to shine over the next year and two.

Given our medium-term outlook, we see the need for some alternatives, precious metals and other commodities in portfolios and a more diversified approach than what is commonly relied upon by other investment managers. Precious metals tend to do very well in recessions comparatively. We believe that the coming years will provide significant opportunity for us to benefit from our positioning in real assets and our investors will be rewarded for sticking with our fundamentals based approach at this important time.

Our Cash Plus portfolio is defensively positioned, while our Short-Term portfolio is relatively defensive, with both designed to be less volatile over shorter term time periods than our longer duration portfolios –being designed for shorter term liquidity needs. Higher cash rates have significantly improved the prospective returns and relative risk/return outlook for these portfolios. Short-Term in particular may be attractive to some investors who are wanting to be very defensive with their longer-term money.

Our more medium and longer term orientated portfolios target returns and manage risk with longer term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back various risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame through dynamic asset allocation. We do however remain relatively conservatively positioned in these portfolios for now given prominent equity market risks but believe that the outlook for the stocks we do hold and our commodity positions over the medium term to be excellent. In particular, many commodities appear to be likely to suffer from undersupply in coming years unless a recession is very protracted (a protracted recession is unlikely in our view given likely policy settings should a recession occur). In contrast, some stocks such as current market darlings in AI, are priced for perfection today and we are avoiding them in contrast to most of the market which is chasing them ever higher in price.

Dynamic Asset’s portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons and in reasonably priced assets. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we believe we are much more forward-looking than most diversified managers which tend to be much more biased to industry peers and what has happened (for example, by relying more upon static weightings, and past returns, correlations and volatility - which we believe are markedly different from today’s conditions).

We are better diversified than many other investment managers because we hold meaningful weightings to alternatives and ‘hard assets’ in different guises and expect these to provide valuable return and risk diversification over time in our portfolio context, even if they are occasionally volatile individually. We believe large and unsustainable debt burdens, demographics, poor government policies and market interference continue to strangle long term real productivity growth for much of the world economy, although AI may provide some relief and competitive benefits for some businesses over time.

We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. The increasing risk of major conflicts gives further credence to our concerns. We think investors are best served by researching thoroughly and thinking more broadly and outside the box in order to better protect and grow their capital, including potentially greater use of selectively chosen value adding liquid alternatives, along with precious metals exposures and greater weightings to real asset proxies. We expect precious metals to do very well comparatively in recession and are maintaining our meaningful positions for this reason.

Over the last year we have increased our positioning in high quality credit, bond and cash as we want to provide relative protection in the (not unlikely) event of a hard-economic landing - rather than the goldilocks scenario that the market is currently pricing and which is possible but unlikely historically given central banks fight against inflation. Over time we expect volatile inflation outcomes will better serve our more diversified portfolio’s positioning - including our real asset and commodity positioning – than the more narrow and less differentiated traditional portfolios. The latter is much more dependent currently on equity performance alone outperforming historical comparisons, which while possible is a gamble.

We aim to remain astute and flexible and highly risk aware in an ever changing and potentially highly challenging investment climate and will continue to look to take advantage of our research effort and the volatility, uncertainty and irrationality of markets to add value to the portfolios through time.

We had good performances again in all of our portfolios in April. We continue to demonstrate lower volatility in our portfolios than many, as we are emphasising genuine diversification at a portfolio level and keeping our positioning balanced. Investing too fully in risk assets at this stage of the economic cycle – as we believe many are doing - is fraught with risk, and won’t be able to take advantage of any market weakness to boost returns from dynamic asset allocation. There is noticeable market crowding again in large global technology names, which may lead index-like investors to significant disappointment as the year progresses.

Real economic and earnings growth will likely remain weak given current monetary policy settings and into a likely recession or softening economy at the very least. This may begin to be priced into markets as persistent central bank tightening and structural challenges impact markets with a lag. Given the macroeconomic backdrop, this would likely provide an outstanding opportunity for our portfolios to shine over the next two years.

Given our medium-term outlook, we see the need for some alternatives, precious metals and other commodities in portfolios and a more diversified approach than what is commonly relied upon by our industry. We will remain fleet of foot and look at judiciously increasing traditional financial (mainstream equity and credit) exposures sometime in 2023 if we ascertain a more favourable valuation and outlook for these assets. We believe that 2023 will be a year full of opportunity for us to tilt the portfolios favourably and thank our clients for sticking with us at this important time.

Our Cash-Plus portfolio is defensively positioned, while our Short-Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios – while being designed for shorter-term liquidity needs. Higher cash rates have improved the prospective returns for these portfolios, and they continue to perform well and in line with their benchmarks.

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth-Builder’s larger risk tolerance gives us the most leeway to back higher-risk assets based on our insights and research, while still managing risk prudently over a longer-term time frame through dynamic asset allocation. There is significant scope here to increase equity positioning in the coming months as opportunities present themselves, but we are relatively conservatively positioned for now, given prominent market risks and short-term earnings outlooks.

Dynamic Asset’s portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we believe we are much more forward-looking than most diversified managers who tend to be much more biased toward industry peers and what has happened (for example, by relying more upon static weightings, past returns, correlations and volatility), which we believe are markedly different from today’s conditions. 

We are better diversified than many portfolios because we hold meaningful weightings to alternatives and ‘hard assets’ in different guises, and expect these to provide valuable return and risk diversification over time in our portfolio context, even if they are occasionally volatile individually. We believe large and unsustainable debt burdens, demographics, poor government policies and market interference continue to strangle long-term real productivity growth for much of the world economy. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. 

We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. The increasing risk of major conflicts gives further credence to our concerns. We think investors are best served by researching thoroughly and thinking more broadly and outside the box to better protect and grow their capital, including potentially greater use of selectively chosen value-adding liquid alternatives, along with precious metals exposures and greater weightings to real asset proxies. 

We aim to remain astute and flexible, and highly risk-aware in an ever-changing and potentially highly challenging investment climate, and will continue to look to take advantage of our research effort and the volatility, uncertainty and irrationality of markets to add value to the portfolios through time.

We had good performances in all of our portfolios in March. We continue to demonstrate lower volatility in our portfolios than many, as we are emphasising genuine diversification at a portfolio level and keeping our positioning conservative in what we believe to be a risky market for investing too fully in risk assets.  

Real economic growth will likely remain weak given current monetary policy settings and into a likely recession. We are still very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. We aim to remain astute and flexible, and highly risk-aware in an ever-changing and potentially highly challenging investment climate.

2023 still sees the risk of an economic and earnings recession and its attendant impact being priced into markets as persistent central bank tightening and structural challenges impact markets with a lag.

Given our outlook, we see the need for some precious metals and selective commodities such as energy and resources allocations in portfolios and a more diversified approach than what is commonly relied upon by our industry. We will remain fleet of foot, as we have demonstrated in March, by taking advantage of opportunities as they arrive, and look at judiciously increasing equity and credit exposures sometime in 2023 if we ascertain a more favourable valuation and outlook for these assets. Currently, capital preservation and prudent diversification are most important in our view in what is a volatile and unreliable market month to month. 

Our Cash Plus portfolio is defensively positioned, while our Short Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios – while being designed for shorter-term liquidity needs.   Higher cash rates have improved the prospective returns for these portfolios.

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back higher-risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame through dynamic asset allocation. There is significant scope here to increase equity positioning in coming months as opportunities present themselves, but we are relatively conservatively positioned for now, given prominent market risks.

Dynamic Asset’s portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we believe we are much more forward-looking than most diversified managers who tend to be much more biased to industry peers and what has happened (for example, by relying more upon static weightings, past returns, correlations and volatility - which we believe are markedly different from today’s conditions). 

We are better diversified than many portfolios because we hold meaningful weightings to alternatives and ‘hard assets’ in different guises, and expect these to provide valuable return and risk diversification over time in our portfolio context, even if they are occasionally volatile individually. We believe large and unsustainable debt burdens, demographics, poor government policies and market interference continue to strangle long-term real productivity growth for much of the world economy. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. 

We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. The increasing risk of major conflicts gives further credence to our concerns. We think investors are best served by researching thoroughly and thinking more broadly and outside the box in order to better protect and grow their capital, including potentially greater use of selectively chosen value-adding liquid alternatives, along with precious metals exposures and greater weightings to real asset proxies. 

We aim to remain astute and flexible, and highly risk-aware in an ever-changing and potentially highly challenging investment climate and will continue to look to take advantage of our research effort and the volatility, uncertainty and irrationality of markets to add value to the portfolios through time.

We had mixed performances in our portfolios in February among weak market returns for bonds, equities and commodities. We continue to demonstrate better capital preservation in recent months than many, as we are emphasising genuine diversification at a portfolio level and keeping our positioning conservative in what we still believe to be a risky market for investing too fully in risk assets.

We still continue to see that inflation is an issue over the medium term, while real economic growth will likely remain weak given current monetary policy settings. We are still very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. We aim to remain astute, flexible and highly risk-aware in an ever-changing and potentially highly challenging investment climate.

2023 still sees the risk of an economic and earnings recession and its attendant impact being priced into markets as persistent central bank tightening and structural challenges impact markets with a lag.

Given our outlook, we see the need for some precious metals and selective commodities such as energy and resources allocations in portfolios and a more diversified approach than what is commonly relied upon by our industry. We will remain fleet of foot and look at judiciously increasing equity and credit exposures sometime in 2023 if we ascertain a more favourable valuation and outlook for these assets. Currently, capital preservation and prudent diversification are most important in our view in what is a volatile market month to month. 

Our Cash Plus portfolio is defensively positioned, while our Short-Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios – while being designed for shorter-term liquidity needs.   Higher cash rates have improved the prospective returns for these portfolios.

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back higher-risk assets on the basis of our insights and research while still managing risk prudently over a longer-term time frame through dynamic asset allocation. There is significant scope here to increase equity positioning in coming months as opportunities present themselves, but we are relatively conservatively positioned for now, given our outlook.

Dynamic Asset’s portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we believe we are much more forward-looking than most diversified managers who tend to be much more biased to industry peers and what has happened (for example, by relying more upon static weightings, past returns, correlations and volatility - which we believe are markedly different from today’s conditions). 

We are better diversified than many portfolios because we hold meaningful weightings to alternatives and ‘hard assets’ in different guises and expect these to provide valuable return and risk diversification over time in our portfolio context, even if they are occasionally volatile individually. We believe large and unsustainable debt burdens, demographics, poor government policies and market interference continue to strangle long-term real productivity growth for much of the world economy. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. 

We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. The increasing risk of major conflicts gives further credence to our concerns. We think investors are best served by researching thoroughly and thinking more broadly and outside the box in order to better protect and grow their capital, including potentially greater use of selectively chosen value-adding liquid alternatives, along with precious metals exposures and greater weightings to real asset proxies. 

We aim to remain astute, flexible and highly risk-aware in an ever-changing and potentially highly challenging investment climate, and will continue to look to take advantage of our research effort and the volatility, uncertainty and irrationality of markets to add value to the portfolios through time.

We had gains in all portfolios along with stronger markets in January. We have demonstrated better capital preservation in recent months than many, as we are emphasising genuine diversification at a portfolio level and keeping our positioning conservative in what we still believe to be a risky and uncertain market for investing.  

We continue to believe that inflation is a lingering issue, while real economic growth will remain weak given monetary policy settings. We are still very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. We aim to remain astute, flexible and highly risk-aware in an ever-changing and potentially highly challenging investment climate.

2023 still sees the risk of an economic and earnings recession and its attendant impact being priced into markets as persistent central bank tightening and structural challenges impact markets with a lag.

Given our outlook, we see the need for precious metals and selective commodities such as energy and resources allocations in portfolios and a more diversified approach than what is commonly relied upon by our industry. We will remain fleet of foot, and look at judiciously increasing equity and credit exposures sometime in 2023 if we ascertain a more favourable valuation and outlook for these assets. Currently, capital preservation and prudent diversification is most important in our view. 

Our Cash Plus portfolio is defensively positioned, while our Short Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios – while being designed for shorter-term liquidity needs.   Higher cash rates have improved the prospective returns for these portfolios.

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back higher-risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame through dynamic asset allocation. There is significant scope here to increase equity positioning in coming months as opportunities present themselves, but we are relatively conservatively positioned for now, given our outlook.

Dynamic Asset’s portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we believe we are much more forward-looking than most diversified managers which tend to be much more biased to industry peers and what has happened (for example, by relying more upon static weightings, past returns, correlations and volatility - which we believe are markedly different from today’s conditions). 

We are better diversified than many portfolios because we hold meaningful weightings to alternatives and ‘hard assets’ in different guises, and expect these to provide valuable return and risk diversification over time in our portfolio context, even if they are occasionally volatile individually. We believe large and unsustainable debt burdens, demographics, poor government policies and market interference continue to strangle long-term real productivity growth for much of the world economy. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. 

We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. The increasing risk of major conflicts gives further credence to our concerns. We think investors are best served by researching thoroughly and thinking more broadly and outside the box in order to better protect and grow their capital, including potentially greater use of selectively chosen value-adding liquid alternatives, along with precious metals exposures and greater weightings to real asset proxies. 

We aim to remain astute, flexible and highly risk-aware in an ever-changing and potentially highly challenging investment climate, and will continue to look to take advantage of our research effort and the volatility, uncertainty and irrationality of markets to add value to the portfolios through time.