Pratik Oswal, Chief of Passive Business at Motilal Oswal AMC, said investors should avoid making allocation decisions based solely on recent market performance [1].
This approach targets the risk of "performance chasing," where investors move capital into markets that have already peaked. In the current climate, this often involves chasing artificial intelligence rallies in East Asian markets, which may not be sustainable for the long term.
Oswal focused on the dynamics of global equity markets, specifically looking at Taiwan and South Korea [1]. While these regions have seen significant growth driven by the AI sector, he said that such rallies may be temporary. Relying on short-term performance to dictate a portfolio can lead to volatility if the trend reverses.
Instead, Oswal recommended a strategy based on fundamentals rather than recent momentum [1]. He said that investors should maintain a stable, long-term global portfolio. According to Oswal, the U.S. should serve as the core allocation within that global strategy [1].
By centering a portfolio on the U.S. market, investors can establish a foundation of stability while diversifying into other regions. This method prevents the common mistake of over-allocating to a specific sector or country after a price surge has already occurred [1].
Oswal said the goal is to build a smarter global portfolio that resists the urge to react to temporary market swings. A fundamental-based approach ensures that the portfolio remains resilient regardless of the short-term fluctuations in the semiconductor or AI sectors in Taiwan and South Korea [1].
“Investors should avoid making allocation decisions based solely on recent market performance.”
This guidance reflects a cautious approach to the 'AI bubble' narrative. By emphasizing the U.S. as a core anchor, Oswal is suggesting that while thematic growth in Asia is attractive, the structural stability of the U.S. market provides a necessary hedge against the volatility inherent in high-growth, sector-specific rallies in Taiwan and South Korea.
