The Right Mix

Did I jinx it last week? Hardly had I expressed my unease about artificial intelligence when things started getting wild in the stock market.

Perhaps I shouldn't have written about the “roller coaster of emotions,” because the plunge that followed was enough to make your stomach drop. At least if your portfolio consisted entirely of AI stocks.

The vast majority of our clients prefer a diversified portfolio. The right mix includes both stocks and bonds. Understandably so, since the volatility of an all-stock portfolio can be hard to stomach.

Bonds Without Raised Eyebrows

Admittedly, the past five years have been challenging for bond investors. Probably the main reason why my argument that bonds have once again become a worthwhile counterweight to stocks was met with raised eyebrows.

Yet while AI stocks came under pressure, bond prices climbed. Yes, it's still been a difficult year for bonds, but further weakness in the stock market could give bond prices another boost.

Of course, I have no intention of talking down stocks (has anyone ever caught me doing that in the past six years of the Gutmann Viewpoint?). After all, there were some interesting developments within the stock market itself.

What's in Fashion

When one theme attracts all the attention, others tend to get overlooked. Take “Demographic Change” and “Consumption in Transition,” both of which have lagged the broader market this year. Although I should really say “had lagged,” because healthcare and consumer stocks are suddenly back in favor.

And that's precisely why Gutmann selects the best companies around the world across a broad range of investment themes. Regardless of whether those themes happen to be fashionable at the moment. Tomorrow, everything could look different.

The shift was particularly noticeable in our dividend strategy. During the market turmoil, these stocks moved almost in the opposite direction. And that's no coincidence. When the economic outlook becomes more uncertain, investors seek out reliable cash flows and attractive valuations.

These turbulent weeks demonstrate why sticking to a clearly defined strategy with discipline makes more sense than chasing the latest market fads. We allow ourselves the luxury of having a clear opinion.