The changing dynamics of financial markets mean employing new strategies, which Neuberger Berman mentions in its outlook report ‘Investing at a Crossroads’. It mentions three investment trends, and the investment management firm discusses whether its outlook is still valid in the current market environment.

“With Investing at a Crossroads, we observed that the global economy and financial markets had benefitted from four decades of significant tailwinds,” writes Erik L Knutzen, Chief Investment Officer, Multi-Asset Class, Neuberger Berman. “We argued that many of those tailwinds were turning to headwinds, that a golden era for investors in long-duration and growth-oriented assets was ending, and a new investment playbook was required.”

Mentioning some of the investment trends, the asset manager says that with the interest rate cycle peaking, some of the themes have been reinforced now and are not challenged by macro headwinds.

Talking about ‘Mind the Gap’, Neuberger Berman says it regards fixed income as close to fair value. It says that equity valuations have not come to enough to account for the valuation and margin headwinds.

The next theme to discuss is ‘Prioritizing inflation-sensitive real and financial assets’. “While the worst of the recent inflation shock appears to be behind us and bond prices now have more room to rise, we would still caution against relying too heavily on “textbook” equity-bond diversification,” says Knutzen.

Under ‘favouring the fittest’, Neuberger Berman says that there is a further adjustment required in the equity market to account for weaker earnings from high interest rates. Talking about prioritizing income stocks and value investing, the investment management firm says the two themes will continue in the long term. “During the transition to our new conditions, the themes of quality, value versus growth and regional diversification in equities, and the themes of short duration and flexible credit allocations in fixed income, were primarily about managing downside risk as the interest rate environment changed. Today, as interest rates begin to peak, they are more about positioning for what we consider to be the most attractive return opportunities in that new environment,” concludes Neuberger Berman.

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