Blokland recommends combining asset classes to achieve returns

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OWith a U.S. recession looming, says Jeroen Blokland Opto sessions why he advocates a multi-asset approach.

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In the short term, II do not think soIt’s a real surprise that inflation remains high,” Blokland said, given the impact of the war in Ukraine and blockages in China on global supply chains.

However, he has a different view on the direction inflation might take in the medium term. If you look at the next 12 to 18 months, inflation could come down sharply, at least temporarily,” he explained.

He attributed this to two main factors.

The first is the impact of base effects. Central banks, and these investors, have therefore chosen to look at an annual change in aggregate price levels and then call it inflation. And that means, by definition, if you look at a change from one year to the next, that inflation is transitory.

Second, he also pointed out that there is a relatively strong positive correlation between oil prices and headline inflation. Now, if you assume that the price of crude oil remains at $100 for the next 12 months, you will see that the annual change in oil prices will decrease and even, at some point, will turn negative,” he said. for follow-up. Blokland believes that while there is some correlation between inflation and energy prices, oil will start bringing inflation down as early as May or June already if we stay at these levels”. But, he added, even if oil rewrites again, at $120 or $130, year-over-year base effects will still drive inflation down.”

A key part of Bloklands investment philosophy and strategy for weathering periods of volatility such as the one we are currently experiencing is his multi-asset approach, which he honed in his previous role as the firm’s multi-asset head of Dutch asset management company Robeco. But why multi-asset?

Investing is about risk and return,” he said. So, without taking any risk, there is no going back. But taking too much risk could also have an undesirable outcome or return.

In the BlocklandThe easiest way to balance risk and return, he says, is to combine different asset classes. In this case, you can also direct the combination of risk and return to levels that correspond to your investment objective.

There is a kind of optimum and the only way to achieve it is to combine different asset classes,” he added. So why not eat the only free lunch that exists in the financial markets? Even if you have a very aggressive risk profile, it is always beneficial to have at least some diversification.

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