Trading Guide: HNIs & Family Office are accepting importance of economic cycle & business cycle investing, decodes Prashant Joshi

The past two years have been a roller coaster ride for the economy, but equity markets globally were on a different path altogether.

The rally finally came to a halt with the metaphoric rise in global inflation, and the correction became evident with the onset of geo-political tensions between Russia & Ukraine.

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Demand for risk mitigation strategies in the current macroeconomic conditions have gone up. With so many moving parts (economic factors, social factors, geo-political events, etc.) and structural changes underway, the HNI’s & Family Office investment approach and portfolio allocation are reshaping.

As a result, the investment environment is continuously transforming for the better amidst unforeseen challenges, which, in turn, are ushering in new investment opportunities.

Prashant Joshi, Co-Founder and Partner, Fintrust Advisors highlights some essential HNI equity investing trends in 2022:

HNI’s & Family Office are embracing the “core & satellite approach” in equity investment. This is a departure from their earlier “Buy & Hold strategy” stance.

Gradually HNI’s & Family Office are accepting the importance of economic cycle & business cycle investing and hence are carving out an allocation for the same.

This may sound risky on the surface; however, when done wisely, economic & business cycle investing brings the much-needed diversification to a “long-only” portfolio in addition to agility, market adaptability and a robust portfolio structure.

A business cycle is generally defined as periods of expansion, contraction, slump and recovery. For instance, cyclical stocks tend to outperform during the early expansion phase.

On the other hand, the defensive sectors such as health care, consumer staples, etc., tend to do well in the contraction period because of their stable cash flows and dividend yields.

Given today’s markets, Banking & Finance and defence sectors look promising. Many stocks have corrected substantially (Refer Table A) and it provides a good hunting ground for cyclical and long-only quality stocks.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)