Morgan Stanley IM: The Markets Have Been Disappointing to the Upside, Presenting a Unique Set of Risks
Jim Caron, Co-Lead Global Portfolio Manager and Co-Chief Investment Officer, Global Balanced Risk Control Team, shares his macro thematic views on key market drivers.
23.05.2023 | 06:21 Uhr
Markets certainly have a way of surprising and upsetting the consensus.
Hence our guiding principle “It’s better to be balanced than defensive.”
To us, being defensive is a style decision, whereas being balanced is focused on asset allocation decisions.
So why is it better to be balanced than defensive? Well we believe
diversified and balanced asset allocation decisions are more likely to
succeed in a greater number of market scenarios, as opposed to trying to
guess a specific market outcome.
But is a balanced approach right for today’s markets? We think yes,
because the risks in the market are more balanced that the consensus
Remember, as we have iterated since late last year, “risk-on is a risk” and like any other risk, needs to be hedged.
Diversification does not eliminate the
risk of loss. There is no assurance that the Strategy will achieve its
investment objective. Portfolios are subject to market risk, which is
the possibility that the market values of securities owned by the
portfolio will decline and that the value of portfolio shares may
therefore be less than what you paid for them. Market values can change
daily due to economic and other events (e.g. natural disasters, health
crises, terrorism, conflicts and social unrest) that affect markets,
countries, companies or governments. It is difficult to predict the
timing, duration, and potential adverse effects (e.g. portfolio
liquidity) of events. Accordingly, you can lose money investing in this
portfolio. Please be aware that this strategy may be subject to certain
additional risks. There is the risk that the Adviser’s asset allocation methodologyand assumptions
regarding the Underlying Portfolios may be incorrect in light of actual
market conditions and the Portfolio may not achieve its investment
objective. Share prices also tend to be volatile and there is a
significant possibility of loss. The portfolio’s investments in commodity-linked notes
involve substantial risks, including risk of loss of a significant
portion of their principal value. In addition to commodity risk, they
may be subject to additional special risks, such as risk of loss of
interest and principal, lack of secondary market and risk of greater
volatility, that do not affect traditional equity and debt securities. Currency fluctuations could erase investment gains or add to investment losses. Fixed-income securities
are subject to the ability of an issuer to make timely principal and
interest payments (credit risk), changes in interest rates
(interest-rate risk), the creditworthiness of the issuer and general
market liquidity (market risk). In a rising interest-rate environment,
bond prices may fall and may result in periods of volatility and
increased portfolio redemptions. In a declining interest-rate
environment, the portfolio may generate less income. Longer-term securities may be more sensitive to interest rate changes. Equity and foreign securities are generally more volatile than fixed income securities and are subject to currency, political, economic and market risks. Equity values fluctuate in response to activities specific to a company. Stocks of small-capitalization companies
carry special risks, such as limited product lines, markets and
financial resources, and greater market volatility than securities of
larger, more established companies. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed markets. Exchange traded funds (ETFs)
shares have many of the same risks as direct investments in common
stocks or bonds and their market value will fluctuate as the value of
the underlying index does. By investing in exchange traded funds ETFs
and other Investment Funds, the portfolio absorbs both its own
expenses and those of the ETFs and Investment Funds it invests in.
Supply and demand for ETFs and Investment Funds may not be correlated to
that of the underlying securities. Derivative instruments can be
illiquid, may disproportionately increase losses and may have a
potentially large negative impact on the portfolio’s performance. A currency forward is a hedging tool that does not involve any upfront payment. The use of leverage may increase volatility in the Portfolio.
Past performance is no guarantee of future results.
The returns referred to in the audio are those of representative
indices and are not meant to depict the performance of a specific
There is no guarantee that any investment
strategy will work under all market conditions, and each investor should
evaluate their ability to invest for the long-term, especially during
periods of downturn in the market.
A separately managed account may not be
appropriate for all investors. Separate accounts managed according to
the particular Strategy may include securities that may not necessarily
track the performance of a particular index. Please consider the
investment objectives, risks and fees of the Strategy carefully before
investing. A minimum asset level is required.
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