Wrought Rebalance

Key changes:

• Add 3% to stocks to increase overweight to 4%, seeking to ride a potential post-election “risk-on” relief rally wave into year-end
• Lean further into preference for U.S. over international stocks, specifically targeting U.S. stocks with strong recent momentum
• Introduce a tactical allocation to gold - funded from fixed income, expecting continued purchases from global central banks and traditional gold narratives to continue to resonate with investors
• Increase credit risk for potential upside in bond-heavy portfolios

Our Take:

With the U.S. presidential election now decided, market participants and economic actors can move forward with renewed clarity. The coiled spring of pent-up business activity from previously postponed capital allocation decisions will now likely begin to release, providing a potential tailwind for risk assets as we enter the historically favorable November-December seasonal period.

Seeking to capitalize on this inflection point, we are increasing our risk exposure across portfolios, with an emphasis on U.S. equities that have exhibited strong recent momentum. For our fixed income-heavy strategies we are increasing the allocation to lower quality bonds that offer more equity-like upside potential. Rather than attempting to thread the needle with tactical sector or industry bets tied to specific electoral outcomes, we're positioning for a broader relief rally that we believe will transcend partisan results. This "uncertainty discount" embedded in market prices should begin to thaw as businesses and investors regain their footing and seek to execute on delayed strategic initiatives.

Our bullish positioning is further supported by an economy that continues to demonstrate impressive resilience,illustrated by a recent turnaround trend of positive economic surprises and robust consumer spending data. 

Yet we also see signs of sufficient economic moderation in areas like job openings, quit rates, and wage growth to give us confidence that inflation pressures remain contained. This "strong but not overheating" backdrop should embolden the Federal Reserve to proceed according to plan with additional rate cuts from current restrictive levels toward a more neutral stance.

Based on this overall context, we think a small tactical allocation to gold could make sense. The yellow metal’s impressive performance this year is especially noteworthy when you consider the strength of traditional economic drivers, notably interest rates and the dollar, that usually act as headwinds. Historically, we have observed higher real rates and a stronger dollar putting downward pressure on gold prices. Our expectation of sustained central bank buying amid an increasingly complex geopolitical landscape, reinforces gold's role as a potentially attractive diversifier to our current stock/bond positioning.

_{This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are as of November 11, 2024 and are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks. ©2024 Wrought Advisors LLC}