Where to Add Risk in Multi-Asset Portfolios Right Now

Key takeaways

  • While the macro backdrop has improved, we believe risky assets are priced too optimistically. At a portfolio level, we remain slightly defensive.
  • However, some risky assets have lagged the broader market rally and appear attractive, specifically, US small capitalization stocks (small caps) and emerging market (EM) equities.
  • We explore some rationale for the performance lag in these two areas. Ultimately, we believe much of the bad news is priced-in, and catalysts are on the near horizon. We think these two assets offer positive asymmetry and are a smart place to add risk in multi-asset portfolios.