Barry Gill
Head of Investments

Wow! What a tumultuous period this has been. It seems as if we have been riding a tidal wave of the unexpected since 2020; one that (hopefully?) reached a crescendo this year. Having enjoyed such calm waters for many years, we are now being challenged to imagine a world where unpredictability features permanently. Somewhat ironically, our list of potential items that investors may not be prepared for in the year ahead, feels more mainstream than in prior years; but that is likely a function of a change in our perception of what is within the bounds of normal.

As we entered this year it looked like the historic diversification benefits of the traditional 60/40 portfolio might come unstuck as inflation started to take hold. Few could have quite imagined the extent to which this would materialize – equities at one point were squarely in bear market territory, while bonds experienced the biggest sell-off since 1994. The question now is what happens going forward? Have valuations reset enough and is there enough yield in bonds to make the 60/40 mix appropriate again? We explore this in our latest Panorama.

Investors are now being challenged to imagine a world where unpredictability features permanently.

Notwithstanding the obvious debt-servicing challenges to households, companies and governments, we now have attractive coupons across the entire fixed income stack for the first time since the Great Financial Crisis 2007-2008. While credit spreads are not particularly wide, some investors may consider that yields are sufficiently high on short duration bonds that they don’t have to take a big bet on duration. Our team looks at where the best opportunities might be found.

After so many years of tech dominance, will investors finally find an appreciation for other types of equities? Will equities have to look a little like bonds to be attractive? Could dividend yields be back? Time will tell, but what is certain is that these types of rotations in the equity markets can create wonderful alpha opportunities, particularly where the institutional mix of shareholders is low. Our O’Connor hedge fund team examines how they aim to identify alpha in a period when generating it is likely to need to take on a more meaningful contribution to equity returns than over the past decade.

Bull markets are typically born when investors ignore good news, but the fear of missing out (FOMO) seems alive and well. This suggests there is more pain to go before markets are really investible again. It feels like more stuff needs to break. Warren Buffett colorfully mused that it is only as the tide goes out that you find out who has been swimming nude. Today’s tide is the rapid rise in interest rates to combat inflation. Where will the weaknesses in the markets be exposed? At the time of writing elements of the crypto market are in turmoil. What will be next? Could yield curve control be abandoned in Japan, and what would that mean? This outcome is one of the more negative surprises we speculate about in this edition of Panorama.

As always, our team is here to support you in your investment journey and help you peer through the fog of uncertainty.

About the author
  • Barry Gill

    Head of Investments

    Barry Gill, Head of Investments at UBS Asset Management since Nov. 2019. Previously, he was Head of Active Equities at UBS AM. Barry joined O'Connor in 2012, overseeing long/short strategy. Prior to that, he led UBS IB's Fundamental Investment Group (Americas). In 2000, Barry relocated to the US, rebuilding Equities' long/short efforts post-O'Connor. He held leadership roles in London, including co-heading Pan-European Sector Trading. Barry started his career as a graduate trainee at SBC in '95.


Investment outlook 2023

In this edition of Panorama, our investment experts recap on the past investment year and explore where the challenges, opportunities and surprises might spring from.

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