Inflation could trend back toward 4% within six months, warns Bank of America Merrill Lynch (BAML) research.
Amid policy uncertainty and market jitters, global investors are pivoting to bonds and cash, fleeing equities—especially tech stocks. Yet, one bright spot emerged in China: Deepseek, a cost-efficient AI platform, drove rare outperformance in the Hong Kong stock market.
Here’s how to adapt:
Prioritize Inflation Protection
(1) TIPS (Treasury Inflation-Protected Securities):
Safety First: 10-year yields hold steady at ~2%. Low returns now, but total return adjusts with inflation.
Record inflows signal investor caution; a reliable hedge if price levels keep rising.
(2) SPARC Fund:
Hidden Gem: Consistently delivers T+200-300 bps (2-3% above Treasury rates).
Combines inflation-beating returns with minimal risk—ideal for uneasy markets.
Cautious:
Long-Duration Nominal Treasuries in fact offer “limited protection” in downturns.
US Tech Stocks: Recent outflows reflect fading risk appetite as (1) Deepseek impact; (2) investors prioritize stability.
Bottom Line
With inflation threatening to resurge, park cash in TIPS for safety or SPARC for stronger yields. Stay nimble — markets are bracing for higher uncertainty world as what we have discussed in our annual report.
Defend your portfolio. Prepare for surprises.