Implementation considerations for defensive strategies
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With the increased availability of non-cap-weighted indexes, investors can now make more efficient allocation decisions by more precisely mapping their investment goals and constraints to the strategies used to build their portfolios. This requires a deep understanding of their investment needs, objectives and the outcomes they expect from the strategies under consideration. Such decisions are often influenced by changes in the macroeconomic cycle and market sentiment. This is particularly true when considering defensive and cyclical investment strategies. At the time of this writing, for instance, market attitudes toward risk appeared to be at an inflection point. Optimism amid signs of a synchronized global growth recovery a year ago has given way to profound risk aversion more recently as concerns about global trade, tightening US financial conditions and a flattening US yield curve eroded investor confidence. The recent outbreak of market turbulence after a protracted period of calm has refocused investor attention on the potential long-term benefits of defensive strategies
