This news service recently interviewed the US wealth management house about its views on the markets, including concerns about inflation and what HNW clients should do about it.
As inflation worries grow, some US wealth managers have rotated into areas such as commodities and parts of the equity market to get protection.
CIBC Private Wealth, the firm with $83 billion in assets under management and administration, doesn’t fear a return of 1970s-style double-digit inflation, but it does expect various forces to push price pressures higher. And it is acting accordingly.
“The core question to solve is how do you address the narrative of massive policy stimulus and the liquidity of extended valuations?” David Donabedian, chief investment officer, CIBC Private Wealth, told this publication in a recent call.
“We are seeing all this liquidity starting to have a meaningful impact on the real economy. This is going to lead to a boom in corporate earnings that has staying power into 2022,” he continued.
“We have been overweight equities versus fixed income,” he said.
On a tactical asset allocation view, CIBC Private Wealth has started to build inflation hedging, such as cutting fixed income, moving to commodities, industrials, precious metals and agriculture.
The firm has also gone into preferred securities – this is a yield play. (Preferreds are a hybrid between a stock and a bond. They are more interest rate sensitive than correlated with the stock market, and offer yields well above core bonds or equities.)
CIBC also likes assets such as floating rate notes – holders will not suffer if the Fed raises rates, he said.