As 2025 approaches, continued uncertainty in financial markets raises questions about portfolio construction and how to invest across asset classes. A long-term investor is participating in the market now by staying invested and diversified. “We believe it’s key to stay invested and view any potential correction as a technical and temporary opportunity to enter the market,” said Aneka Beneby, portfolio manager at Julius Baer International, in an interview with CNBC Pro last month. , a global recession “is likely to be avoided at this time, and a bumpy and moderate cyclical recovery driven by lower interest rates is more likely to boost economic growth.” Against this backdrop, she observes that the traditional 60/40 portfolio is making a “comeback,” with 60% of funds invested in equities and the remaining 40% allocated to fixed income. Overweight equities Looking ahead, Benibi is overweight equities, preferring equities over fixed-income assets given relatively high inflation levels. Her comments came as the U.S. consumer price index, a key measure of inflation, rose 2.6% in October from a year earlier. While the data was in line with economists’ expectations, it was an increase from the 2.4% reported last month. The portfolio manager expects structural inflation around the world due to “localization of supply chains, energy transitions and geopolitical outbreaks,” with U.S. inflation reaching 3% or higher next year. “Rising inflation makes equities more attractive than fixed income,” she added. In terms of allocations, she is bullish on the U.S. but also sees opportunities in other regions for companies with diversified revenue streams. Unlike the sharp rally in U.S. equities, fixed income has been under pressure thanks to high volatility. The benchmark 10-year Treasury bond yield is currently hovering around 4.25% after falling to a new low on November 29 due to the shortened U.S. market trading day during the Thanksgiving holiday. Judging from the trend, Benibi is betting on “short-lasting, triple-B companies in the United States and Europe.” The bonds typically have a maturity period of three to six years, she explained. Portfolio managers call such bonds “attractive” because they have good fundamentals and low default rates. In addition to short-term bonds, Beneby is also focusing on long-term bonds and “high-quality dollar bonds” with yields around 5% to hedge against possible recession risks. Such bonds “mitigate some of the reinvestment risk in the short term while providing hedging qualities to the portfolio,” she explained. In addition to traditional assets, Benibi has also sought to allocate gold amid macroeconomic uncertainty, rising geopolitical tensions and a desire to hedge against inflation. Spot gold prices rose slightly on Tuesday, with prices currently around $2,642, amid strong U.S. labor reports. Spot gold is down around 0.12% so far this year, following sharp gains in October and November. Benibi pointed out that central banks in non-G7 countries have also been “buying gold to protect themselves from possible sanctions and the depreciation of the dollar.” In addition to the G7 countries, which include Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, she also noted that “rising debt levels have undermined the dollar’s status as the world’s reserve currency.” “In the long term, this will support gold,” Benibi added.
