The Nordic manager Evli has decided to give more weight to emerging market equities and 'high yield' bonds over sovereign debt with a horizon towards the end of 2026, as a strategy to face the current environment of strong economic growth and moderate inflation, the so-called 'goldilocks' scenario.
The firm has increased its bet on emerging markets after the corrections suffered in summer by companies linked to artificial intelligence (AI) infrastructure, as these economies maintain a relevant exposure to this theme through the supply chain of memories and chips.
"Growth is no longer concentrated solely in large AI companies, but has spread to cyclical, financial, and industrial sectors," explains the director of systematic funds and senior portfolio manager at Evli, Peter Lindahl.
According to the entity, the valuations of emerging market companies remain more attractive than those in the United States.
At the same time, Evli has chosen to reduce the underweight in Europe, where the advance of corporate profits again recorded double-digit rates in the second quarter of the year, and has brought its position in the United States closer to a neutral level, being the market where the theme of AI has the greatest weight.
In parallel, the manager continues to intensify the sector rotation towards the financial, energy, and industrial sectors, while cutting its exposure to longer-duration growth companies.
"Interest in AI-related infrastructure and semiconductor stocks remains high, as they offer more attractive valuations and stronger cash flows than growth companies, whose cash flows are more sensitive to the yields of 4.7% bonds and low interest rates," explains Lindahl.
In the fixed income area, Envi justifies the overweight in 'high yield' bonds on the "solid corporate fundamentals" combined with low 'default' rates and the extra yield despite the increase in issuances, especially from companies linked to AI.
The firm, on the contrary, maintains an underweight position in sovereign debt due to a risk profile that it considers more asymmetric: "The yield on 10-year bonds is near its highest level in two years, and a new advance towards 5% would be more detrimental to duration," it justifies.