Barron’s Weekend Summary: A long-term portfolio should look very different going forward than it did in the past 10 years
Cover Story:
-With stock and bond indexes projected to have low-single digit returns for the next market cycle, a long-term portfolio should look very different going forward than it did in the past 10 years. Barron’s suggests engaging in active stock-picking, or buying funds that do so, rather than deploying passive indexes; adding alternatives; and, yes, adding to fixed income.
Interview:
-Rick Rieder oversees some $2.4T in assets as BlackRock’s chief investment officer of global fixed income. His winning formula today is to focus on shorter-dated bonds and avoid taking too much risk. Rieder also serves as chairman of the BlackRock Investment Council and manages the $41B Strategic Income Opportunities Portfolio, among other mutual funds.
Rieder joined BlackRock when the asset manager bought his R3 Capital Management hedge fund in 2009. Before that, he spent more than two decades at Lehman Brothers, eventually rising to become the firm’s head of global principal strategies and credit businesses.
Tech Trader:
-The market downturn, the weaker economy, and the reversal of some pandemic-era trends have exposed weaknesses in the business models of companies such as Peloton Interactive, Zoom Video Communications, Shopify, Affirm Holdings, and Snap, and investors have adjusted valuations accordingly. But there are still some powerful underlying secular trends that should eventually drive tech stocks higher. Investors with long time horizons and strong stomachs might consider inching into the market. I have a few ideas on where to look.
The Trader:
-Petrobras stock may still be worth buying. That may sound like a terrible idea, at least at first glance. Petróleo Brasileiro, or Petrobras (ticker: PBR), as it is more commonly known, is the Brazilian national oil company. Brazil, meanwhile, is staging its presidential election on Oct. 2, one that pits current far-right President Jair Bolsonaro against far-left former president “Lula” da Silva, with Lula expected to win. A leftist government would be bad news for Petrobras, which would likely become a tool of government policy rather than a vehicle for shareholder returns. Yet J.P. Morgan analyst Rodolfo Angele argues that Petrobras is still worth owning.
-US economic data remains strong, as jobless claims fell below 200,000 for the first time since May, a sign that the Fed will have to keep raising interest rates to slow down inflation. On the other hand, the rest of the world seems on the verge of imploding, with the mess in the United Kingdom serving as Exhibit A. The stock market didn’t take it all that well. The DJIA and the S&P 500 both dropped 2.9% for the week, while the Nasdaq Composite fell 2.7%. All three indexes finished the week at new 52-week lows.
Features:
-Institutional players are now looking long-term when it comes to digital assets, despite the short-term volatility. This summer has seen leading asset managers including Abrdn, Blackrock, and Charles Schwab invest in digital-asset offerings. These developments are representative of a broader trend, with a wide spectrum of investors clamoring for access to the sector. According to a PwC report earlier this year, more than a third of traditional hedge funds now invest in digital assets, nearly double the figure from a year earlier.
-Is it time to buy UK yet? The answer isn’t an easy one. Investible assets, from blue-chip companies to prime real estate, have grown relatively cheaper in the UK, particularly if you’re paying in dollars, which have strengthened as the pound has weakened. Blackstone CEO Steve Schwarzman recently paid $85.5M for a 2,500-acre historic property in Wiltshire. As Bloomberg noted, the property would have cost $110M last year, purely on a currency-exchange basis.
European Trader:
FedEx’s unexpected profit warning may have delivered a buying opportunity for shares in Deutsche Post DHL Group. The global package-delivery and supply-chain company’s stock was caught up in its peer’s gloomy economic outlook, slipping to EUR 30.51 ($29.29), 15% below where they were before FedEx’s warning in mid-September. Those fears may have been overdone, however, as Deutsche Post said in August that it would meet its full-year earnings forecast range under a span of economic scenarios.
Emerging Markets:
-Apple launched production of its new iPhone14 in the Indian city of Chennai, just weeks after its flagship factories in China. That could be the start of a dramatic trend. A quarter of the world’s iPhones will be assembled in India by 2025, up from 3% now, analysts at JP Morgan predict. “For iPhone, India appears to be the ideal location to diversify the supply chain away from mainland China,” they write. They expect other Apple products to gravitate toward Vietnam.
Commodities:
-Shares of aluminum producers Alcoa and Century Aluminum are taking off in response to reports that the London Metal Exchange could ban Russian aluminum. Alcoa stock was up 6% in early trading Thursday. Century shares are up almost 8%, while the S&P 500 and DJIA were off 1.3% and 1.1%, respectively. The stocks, of course, are moving right along with the price of the commodity. Benchmark aluminum prices are up more than 7%, according to Bloomberg. The news service reported that the exchange plans to launch a discussion paper on whether, and under what circumstances, it should block deliveries of Russian aluminum to its warehouses.
Streetwise:
-Jack Hough doesn’t think house prices are falling down significantly. “US house prices just fell for the first time in a decade, you may have heard. One report called it a record cooldown. Yikes—I considered panic-selling my house to myself, but when I learned how much I was asking, I had to walk away. There are reasons to believe we’re not headed for anything like the epic housing bust of 15 years ago. Home buyers might not face easy choices, but there are opportunities for stock investors. More on those in a moment.”