The external asset management house gives reasons for a balanced portfolio, taking some protection with US equities, and holding gold.

A backdrop of higher economic growth revisions and continuing disinflationary trends is “supportive” for stock markets, fixed income, and thus a balanced portfolio, according to Geneva-based Apricus Finance.

In a note written shortly before US President Joe Biden announced that he would not be contesting the November election and on the eve of this month's corporate earnings season; the external asset management house said it is not yet willing to join a rotation into US small caps. It made no asset allocation changes in July.

“Smaller companies tend to outperform when rates are cut while the economy stays reasonably strong along with a healthy consumer. Our main scenario is that the US economy is likely to grow below trend over the next couple of quarters, and the situation for the average consumer will worsen before improving,” the firm said.

“We continue to have a constructive view for the ‘balanced portfolio’ for the next three to six months. Bar an accident, we believe high nominal growth, peak rates and broadening earnings performance continue to underpin equity market performance,” Apricus continued. 

The investment house (see this publication's interview with it here) has bought protection on US equities via the options market by taking a put, which matures in December this year. 

“In terms of risk, we continue to focus on where the potential ones are to our positioning, and that we can, at least in part, control,” it said, giving examples such as a peak in companies’ earnings due to margin compressions; lower capital spending in AI, which has been a leading theme since 2023; a worsening of the global economic situation, with the biggest risk coming from China, and a cessation of the disinflationary trend.

Apricus is holding to its overweight in eurozone equities versus the US broader market and remains overweight in Japanese shares. On US stocks, it has partially protected on the downside.

In fixed income, the EAM favours exposure to credit versus duration: “We have exposure to investment grade credit, European high yield, hybrids, financials’ subordinated debt, US municipal infrastructure and Asian hard currency debt."

On the forex side, Apricus said Japanese yen exposure is mostly hedged, it has a 5 per cent exposure to the US dollar. On gold, the firm has a 5 per cent allocation to the yellow metal. 

(See a previous story about Apricus' views on investment.)