“We are witnessing the rise of private assets to the core of many asset allocations from a peripheral ‘alternative,’ and we have entered a new period of heightened macro uncertainty,” according to a paper published by the two organizations in October. “Both could require a fundamental evolution of the asset-allocation process.”
Read more: A strong alternative to the traditional 60/40 portfolio
As a result, a macro framework is produced that links the cash flows and discount rates of an investment to a variety of potential outcomes, including shocks to demand, supply, productivity, policy, and real rates.
The report claims that during the past 20 years, demand shocks have dominated as the macroeconomic environment’s primary driver. In this setting, declining economic demand pushed down growth, inflation, and real rates.
According to the report, this made it possible for stocks and bonds to serve as hedges against one another.
