Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
ASX gains ahead of US Fed decision, gold miners sink on outlook, Woodside’s record day
It was another positive day for the local market with the S&P/ASX200 adding 0.9 per cent on growing optimism that the spiralling global banking crisis will cause a slowdown in the pace of rate hikes. The Federal Reserve is set to meet overnight, with bond yields remaining well below levels of just two weeks ago and contributing to strength in the technology sector. Every sector was higher, barring real estate, which fell 0.5 per cent as the focus falls on the appropriateness of current valuations. Shares in Domain Group (ASX:DHG) overcame the weakness adding 4.3 per cent. The energy sector led the way, gaining 4.2 per cent on a record day for Woodside (ASX:WDS) which added 5.2 per cent after the oil price gained more than 2 per cent amid hopes the economy may not slow as much as expected.
Gold scuffed, KMD’s bumper year, banks tap central bank funds
Gold miners were among the worst performers on Wednesday, led by Silverlake (ASX:SLR) which fell 5.6 per cent as investors moved away from the safe haven and back into equity markets. Both Regis (ASX:RRL) and St Barbara (ASX:SBM) were down by more than 3 per cent each. The standout, however, was KMD Brands (ASX:KMD) which owns Kathmandu and Rip Curl, as shares gained 1 per cent despite reporting a 34 per cent in sales in the six months to January. Profit trebled to NZ$14 million and earnings 11 per cent, with the board remaining ‘cautiously optimistic’. Analysts were wary of comments around higher freight and input costs, but no apparent slowing of sales thus far in 2023. In a sign of the challenges facing the global financial system, local banks tapped US$152 billion in liquidity from the central bank, ahead of the US$110 billion peak of last year, as they seek to provide liquidity and combat falling confidence in their solvency.
Markets fall as Yellen says no, Fed hikes rates, NVIDIA rallies
Global benchmarks fell overnight with the S&P500, Nasdaq and Dow Jones all down by 1.6 per cent as both Janet Yellen and Jerome Powell delivered bad news. The treasury secretary reported that the government was not considering guaranteeing all bank deposits, while the Federal Reserve hikes rates by another 0.25 per cent. This was enough to trigger the short-term weakness, however, comments by Powell suggested just one more rate hike may follow. Shares in Nike (NYSE:NKE) fell by close to 5 per cent following its earnings report the prior day, while the rally in meme stock Game Stop (NYSE:GME) continued, with shares up 35 per cent after the company reported a surprise quarterly profit result. It was a similar story for NVIDIA (NYSE:NVDA) which gained 1 per cent after announcing further investment into the technology that is driving uses like Chat GPT.
