Bridgewater Associates has identified three key bets beyond U.S. stocks which it says can provide a layer of resilience to portfolios as investors’ equities exposures hit all-time highs. The hedge fund giant which manages about $90 billion in assets, sees a wealth of opportunities across foreign companies, gold and bonds that investors have “hardly begun to tap,” according to Karen Karniol-Tambour, Bridgewater’s co-chief investment officer. “Besides being attractive on their own, these assets offer valuable downside protection, which is itself another kind of opportunity,” she noted in the firm’s latest “Connecting the Dots” market commentary. Karnoil-Tambour said most of the companies in the S & P 500 beyond the Magnificent Seven are trading at a premium to non-U.S. stocks, despite foreign companies showing similar earnings growth. “Companies abroad are effectively on sale — you can buy a comparable stream of earnings for less.” Specific plays include Germany, where fiscal easing is expected to boost defense and infrastructure stocks, and Japan and South Korea, amid the drive to improve corporate governance. .STOXX YTD mountain Stoxx 600 By pouring more money into foreign stocks, investors can better withstand a potential equities reversal, she said. Households’ exposure to U.S. stocks has swelled from roughly 50% of their investments following the Global Financial Crisis to about 80% today, according to the analysis. ‘Hedging monetary risk’ Bonds, meanwhile, offer better yields for investors looking to curb downside risk, according to Bridgewater, as the near-zero interest rate environment that prevailed in the years following the crisis has “fundamentally shifted.” “While high government debts and deficits are certainly a risk worth noting, the risk can be mitigated by holding bonds across different economies,” Karniol-Tambour said. Gold prices have surged this year, hitting $3,900 per ounce on Oct. 2, according to a UBS note Friday — and Bridgewater thinks it can go further. XAU= YTD mountain Spot gold Concerns around inflation, rising public debt, and geopolitical tensions mean allocators are more willing to stomach the “zero-yield opportunity” in the precious metal in order to offset the risk of “significant” losses here. UBS said central bank purchases of gold will remain solid this year, at between 900 and 950 metric tons this year. “Gold price action reflects a world where central banks and other investors are increasingly seeking to hedge monetary risk,” said Karniol-Tambour. Bridgewater – which was founded in 1975 by Ray Dalio – saw its flagship macro strategy, Pure Alpha II, notch a 26.2% return from the beginning of the year until Sept. 29, according to Reuters . Goldman Sachs CEO David Solomon warned on Friday that stock markets could face a “drawdown” in the next year or two following the AI-driven bull run. “There are going to be winners and losers,” he said at Italian Tech Week in Turin, Italy. Georges Debbas, head of EU equity derivatives at BNP Paribas , said macro-focused investors could be set to broaden out their concentrated bets from U.S. value names towards other regions. “Their interest in Europe is picking up, not massively, but we expect things to change once we see a bit more earnings momentum coming,” Debbas told CNBC’s “Squawk Box Europe” Thursday. “[European banks] remain one of the mega winners,” Debbas said. “As a solid compounder it remains one of our favorite long cyclicals.”
Friday, February 13
Bridgewater says investors are missing three big bets hiding beyond U.S. megacaps
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