For the past few months, MB Fund has undertaken a pivot away from the inflation/value trade. We were early getting into the revival of value, having forecast the inflation scare well in advance. During the scare, we took a lot of profits on winning trades in banks, miners and cyclicals. We pivoted this equity exposure to high-quality growth. We also shortened our equity exposure somewhat given the rising risk case for falling inflation to morph into a growth scare and lengthened our bond exposure somewhat. We also weighed more heavily offshore.
So far, the pivot has played out nicely as we’ve dodged cyclical stock downsides, as well as the caning at the short-end of the bond curve. The market has also moved back towards growth, especially quality, via the Market Ear:
NASDAQ closed at all time highs yesterday, but people hardly even mention it. The crowd has been busy trying to figure out how to get out of all the value/reflation trades that have puked recently. NASDAQ has performed well lately, absolutely but above all relatively speaking.
