Global equities, as measured by the Bloomberg World Equity Index, were up 8% this year to the end of May.
Does this mean there will be a soft landing and markets will continue to climb? Year-to-date market gains certainly support the bulls, as do continued strong employment and recovery signs in housing. On the other side are the bears, highlighting the narrow breadth and weakness in many forward-looking economic indicators pointing to recession risk.
Such opposing views are normal. Often during uncertain times, conflicting data is rampant.
In digging deeper, evidence shows that eight large companies – all of them involved in developing Artificial Intelligence (AI) – accounted for most of the gains in the US and Global indices. Fortunately, these are companies we have believed in for years, several of which we hold in our QW Elevate Enhanced Global Equity Pool. However, the picture is not so rosy when looking beyond these names. The TSX was up only 2% on the year, Europe has given back some of its strong early-year gains and bonds are barely positive year-to-date.
We are more bullish than some in looking to the next few years, but we also recognize today’s uncertainties and geopolitical risks and have moved to protect some of our year-to-date gains. We have increased our option collars to cover about 80% of the assets in our equity pool … in case the bears are correct, and markets turn weaker this fall.
