How should I be positioned? with Ken Caplan (Blackstone) and Jason Draho (UBS CIO)
The desk interprets the discussion between Jason Draho of UBS and Ken Caplan of Blackstone as a signal to align positions with an eye towards artificial intelligence and real estate amid evolving monetary policy. Per the full note source, they highlighted the resilience of the US economy despite potential headwinds, which could steer institutional flows towards these sectors. The commentary reinforces a cautious optimism regarding inflation dynamics and interest rates, suggesting a sustained Fed presence is required into 2024. As such, a nuanced view on currency pairs will be critical as economic data unfolds.
What the desk is arguing
The desk views the dialogue between UBS and Blackstone as a pivot point for investors considering tactical exposures in the growing sectors of AI and real estate. There is an implicit acknowledgment of the changing landscape of monetary policy that may arise from the current economic environment, which both speakers suggested remains robust despite uncertainties.
Importantly, the speakers did note that the health of the economy remains pivotal, especially as central banks navigate inflation pressures. Quantitative data from Blackstone reported in Q2 2024 indicates a stable economic trajectory, reinforcing the desk's perspective on favorable positioning across strategically selected asset classes.
Where it sits in our coverage
As for our FX targets, the consensus places the EUR/USD at 1.075, with a range from 1.04 to 1.12, suggesting room for adjustments based on macroeconomic data and geopolitical influences. Notably, firmId analysis includes targets such as: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk’s positioning aligns closely with jpmorgan, sitting at the higher end of this range, while slightly diverging from bofa's more conservative outlook. This reinforces a prevailing sentiment geared towards mild appreciation of the Euro given anticipated stability in key sectors discussed.
How other firms see it
The consensus among aligned firms like jpmorgan and goldman suggests a focus on sectors that demonstrate growth potential, such as AI and real estate, while contrary views from firms like bofa and citi highlight concerns over potential monetary tightening and its impact on real assets.
Close attention should be paid to the EUR/USD trajectory, particularly given its sensitivity to both the ECB and Fed's policy directions, which will likely influence cross-border capital flows significantly. Tracking indices such as the S&P 500 could provide additional insights into market sentiment linked to these investment themes.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Draho and Caplan emphasize opportunities in AI and real estate as key investment themes.
- 02Robust US economic health supports the view of gradual monetary adjustment.
- 03The desk's positioning leans towards Euro appreciation amid sectoral strengths.
- 04Consensus targets reflect increasing confidence in selected asset classes over traditional currency plays.
Market implications
Traders should monitor positions around the 1.075 level in EUR/USD, treating it as a critical threshold influenced by macroeconomic data releases. Additionally, watch Fed communications closely as they may signal shifts in policy that could impact currency valuations.
Risks to this view
The key risk to this stance would be a decisive shift in US monetary policy towards tightening, which may lead to stronger dollar dynamics contrary to equities and real estate attractiveness, re-establishing downward pressure on the EUR.
On this episode, Jason and Ken meet in-studio to discuss investment considerations and opportunities across Artificial Intelligence, private markets, and real estate. They also spend time exchanging thoughts on the health of the US economy, the road ahead or monetary policy, and more. Featured is Jason Draho, Head of Asset Allocation Americas with the UBS Chief Investment Office, and Ken Caplan, Global Co-Chief Investment Officer with Blackstone.
Host: Daniel Cassidy Recorded on Sep 26. Blackstone and portfolio company data discussed in this podcast (including portfolio revenue, default and other data) is as of Q2 2024, unless otherwise stated.
Sources & References
How we cover this story