CIO Insights 3Q23: King, Queen & Castle
For Chief Investment Officer Hou Wey Fook, the functions of key chess pieces reflect our portfolio strategy for this quarter
Chief Investment Office21 Jun 2023
  • Low risk of deep recession and pause in trajectory of rate hikes constructive for risk assets
  • Risk assets no longer overvalued, having adjusted to a surge in discount rate
  • Stay invested with growth equities and income generators
  • Favour Investment Grade bonds over cash deposits as income generators in a portfolio
  • Stay with Big Tech stocks; trajectory of strong earnings growth intact, buoyed by AI trends
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Dear valued clients,

It is tremendously encouraging to see risk assets staying resilient, even rallying, despite unnerving developments such as the banking tumult on both sides of the Atlantic, followed by fears of a U.S. default — averted in the nick of time when Biden signed the debt ceiling bill.

Our high conviction call to be invested in the “60/40 portfolio” from the start of this year has panned out well with a 10.7% return (as of 16 June).

Leaning into a long-term view, we advocate the deployment of excess portfolio cash to investments. Today’s risk-free rate at 5.25%, up from near zero just 18 months ago, suggests valuations across financial assets have adjusted accordingly and is now no longer overvalued. After all, corporate bonds and equities are priced off the risk-free rate

This quarter’s CIO Insights report is titled King, Queen & Castle, so named after key chess pieces whose functions reflect our portfolio strategy. In particular, the “Castle” represents income generating assets that protect the purchasing power of capital (“King”) against inflation. Then we have the “Queen” — a dynamic piece which can traverse the chessboard in multiple directions, reflecting our preference for growth boosters that drive capital gains.

In this publication, we also highlight Artificial Intelligence as a game changer for our bullish secular outlook on Big Tech stocks.

Do enjoy the read.

Hou Wey Fook, CFA
Chief Investment Officer

Download the PDF to read the full 3Q23 CIO Insights report.


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