As markets approach the second half of the year, investors are reassessing their portfolio strategies. Impax Asset Management co-portfolio manager Christine Cappabianca joins Wealth! to offer insights into market outlooks and evolving investment approaches.
Cappabianca highlights a significant shift in investor focus toward “less traditional style factors” as a means of risk neutralization. She emphasizes the growing importance of managing less standardized variables such as geopolitical tensions, election outcomes, and interest rate fluctuations.
The question now is “how we can measure these less standardized factors so we don’t get swung around as these alternative factors impact the markets,” Cappabianca tells Yahoo Finance.
For more expert insight and the latest market action, click here to watch this full episode of Wealth!
This post was written by Angel Smith.
Video Transcript
Let’s kind of take a look back, I’ll walk down memory lane if you will uh to the extent that we are as we’re kind of wrapping up the first half of this year and apply some of those findings to what could happen or what is anticipated in the second half.
What are some of the top considerations for you as you’re looking out into the future?
Absolutely.
I and I, I think you’re gonna get a little bit of a unique perspective from me.
Um Given that I am a quantitative portfolio manager um who specializes in more thematic styles of investing.
Um So one thing that I think applies both, you know, what we’ve learned over the past six months and how we’re, we’re thinking of the, the next six months ahead is we’re really starting to, to focus on uh less traditional style factors in terms of um managing risk and, and neutralizing our portfolios.
Um You know, we’ve seen a lot of the impact of A I um we’re starting to tackle about the impacts of elections, uh interest rates and global unrest.
It’s um how can we measure these um less standardized factors and how can we neutralize our portfolio so that we don’t get swung around as these kind of alternative factors impact the markets of the top themes that have really played out uh especially over the first half here of 2024.
I mean, uh largely, even as we think about one specific name, it’s been, it’s been Invidia and how high can the one singular name that has been the poster child at this juncture for the picks and shovels of generative A I carry the rest of the market.
How long does that theme hold strong from your purview?
You know, I I obviously that drove a lot of the year to date and um I don’t believe A I is going anywhere, I mean, as, as a quant, I see it going to help my work positively and um you know, I have three Children and teaching them how to use A I, so I do think we’re just at the beginning of that theme.
Um But so it is just one of the, one of the many themes that um and you know, macro factors that are going to be driving the markets.
I think there might be a bigger diversity and factors driving the market going ahead.
One of the factors is also the fed sensitivity that this market has right now here.
How are you evaluating the rate cut anticipations that the markets are, are trying to wrap our heads around and not fighting the fed, but at least anticipating what may be coming, you know, in most of my portfolios um in our uh portfolio that focuses on a more of a gender lands, a gender factor.
In our goal is to neutralize our exposure to interest rates.
Um when my other thematic portfolio is infrastructure which has been particularly rate sensitive.
Um So we are uh there’s not much you can do from uh infrastructure and asset per um perspective to avoid being rate sensitive.
So we are kind of awaiting the the peak rates there.
Um And, and expecting it to positively impact the portfolio.
Um We’ve seen June has been pretty positive um from that perspective, um I think our sustainable tilt impacts is known for um our sustainability tilt um on all that we do and that has helped us um versus uh traditional infrastructure, but it has still been a headwind um that we are awaiting um awaiting a change on certainly.
And so as you do think about the second half of this year, what, what are some of the top areas that investors would be apt to keep on their watch list again, I I think, you know, neutralizing the risk.
I, I think we’re going to see bigger baskets of stocks that are uh taking a bet on the outcome of the election and just kind of identifying those and, you know, knowing where you stand, where your portfolio stand from that perspective and, and there are certain quant tools that we use.
Um They call it either blind factor analysis, principal component analysis to identify those stocks um that, you know, maybe swing in one direction or another a as sentiment swings towards the election.
Um So I think that will be um a particularly sensitive area going forward.
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