Positioning for a new market cycle: Insights from Jurrien Timmer
On June 16, Fidelity’s Director of Global Macro Jurrien Timmer, shared his insights on shifting global capital flows, evolving safe havens and the implications for portfolio strategy.
Here are some of the key points from his commentary.
Safe havens are evolving
Recent market reactions suggest that traditional safe havens like U.S. Treasuries and the dollar may not be responding to geopolitical stress as they have in the past. Gold, on the other hand, has shown more consistent behaviour during recent risk-off periods.
This shift may reflect a broader change in how investors view global risk. Gold is increasingly being accumulated by central banks and is gaining traction as a strategic reserve asset. While the dollar remains a key player, its role appears to be adjusting in a more multipolar financial environment.
Gold and bitcoin show alignment
Gold’s role as a hedge is being complemented by bitcoin, which is beginning to behave more like a store of value than a speculative asset. Both assets have shown similar risk-adjusted returns recently, and their price movements are becoming more aligned.
While they serve different purposes and carry different risk profiles, gold and bitcoin may now be viewed as part of a broader toolkit for diversification. Their combined presence in portfolios could offer an additional layer of resilience, depending on investor goals and risk tolerance.
International equities gain momentum
Earnings estimates for non-U.S. developed markets are improving, while U.S. estimates have levelled off. This trend is contributing to a more balanced global opportunity set. For investors who have been underweight international equities, this may be a moment to reassess.
The MSCI ACWI ex-U.S. index recently reached a new all-time high for the first time since 2007. While not all regions are experiencing the same level of growth, there are signs of renewed strength in areas that have lagged for years. This includes both developed and select emerging markets.
Revisiting the 60/40 portfolio
The traditional 60/40 portfolio may need to evolve in response to today’s market dynamics. With bond yields near the upper end of their fair value range and equity valuations elevated, some investors are exploring more flexible allocations.
One approach involves adjusting the equity and fixed income mix to include alternative assets such as gold, liquid alternatives or bitcoin. These adjustments can help address the need for diversification while acknowledging that past performance patterns may not repeat in the same way going forward.
Market leadership remains narrow
Mega cap growth stocks, often referred to as the MAG7, have led much of the recent market recovery. While their valuations have moderated, they still trade at a premium to the broader market and represent a significant portion of major indices.
However, market breadth remains limited, with fewer stocks participating in the rally. This can be a signal for advisors to monitor concentration risk and ensure portfolios are not overly reliant on a small group of companies for performance.
Final thoughts
The current environment calls for thoughtful portfolio construction and a willingness to adapt. While uncertainty remains, there are also areas of opportunity particularly outside the U.S. and within alternative asset classes.
By staying diversified, focusing on fundamentals and maintaining a long-term perspective, investors can better navigate the complexities of a changing market cycle.
