Is Your Multi-Asset Strategy Equipped for an Economic Surprise?

As of August 31, 2024, the US capital markets are well-suited for multi-asset strategies, demonstrating strong performance relative to other developed markets over the past decade. Growth stocks have particularly excelled in 2023, driven by leading tech companies and optimism surrounding artificial intelligence, with the Russell 1000 Growth Index returning 21.0% year-to-date, outpacing the MSCI EAFE and MSCI EM indices.

A soft landing for the US economy is anticipated in 2024, but diversification across equity segments is recommended to mitigate risks. Defensive stocks, characterized by low volatility and high dividends, tend to perform better during downturns, making them important for managing downside risk, while small-cap equities historically outperform during economic expansions.

Overall, active multi-asset investors with a balanced mix of defensive and growth equities are likely to be better positioned to navigate potential economic fluctuations.