Market sell-off requires more emphasis on diversification

Key insights

• Market sell-off. After more than a year without a significant correction, equity markets declined as interest rates moved sharply higher due to concerns that inflation may be rising. The decline was overdue, in our opinion, and is consistent with our belief that inflation is likely to increase, but should remain subdued.

• Fundamentals: Macro and micro fundamentals at corporate level are intact as the recent earnings reporting season confirms.

• Volatility bounced back from ultra-low levels. Macro hedges (volatility, gold, safe haven cross rates, options strategies) in this market environment are key.

• Embrace an active approach. An active and flexible approach within a solid macro and micro fundamental backdrop is key to possibly capturing opportunities that this market correction may bring again.

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