AI, productivity and higher bond yields are challenging old portfolio assumptions. Matt Sherwood explains in this new video podcast.

AI’s promise to lift productivity is reshaping market expectations, but with inflation pressures proving persistent and bond yields remaining elevated, Sherwood – head of investment strategy within Perpetual’s Multi-Asset team – argues investors may need to rethink some long-held portfolio assumptions.

He discusses how AI could help Australia’s productivity challenge but not solve it, why its investment impact is likely to be uneven, and what higher-for-longer bond yields mean for portfolio construction.

Sherwood also explains why bonds may no longer provide the same reliable defence against equity market falls — and why investors may need to place greater emphasis on quality, liquidity and downside protection in a more volatile environment.

Here’s an excerpt from the video podcast:

“Bonds have one job in a portfolio – to go up when equities go down. 

“That strategy worked well for two decades, but in 2022 a great relationship ended, and I am not referring to Johny Depp and Amber Heard, but rather bond and equity prices became positively correlated, so as yields rose, bonds took on capital losses right alongside equities. 

“And with yields set to stay high and volatile, that equities hedge can’t be relied upon. The portfolio consequence here is straightforward.

“AI could certainly help Australia's productivity problem, but I don't believe it can solve it. 

“AI will initially augment workers … but productivity ultimately depends on incentives, and Australia I think has lost many of the advantages that we had 20 years ago.”

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This podcast has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535 AFSL 234426.

It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider whether the information is suitable for your circumstances and we recommend that you seek professional advice.

The product disclosure statement (PDS) for the relevant Perpetual Multi Asset fund (Funds), issued by PIML, should be considered before deciding whether to acquire, dispose, or hold units in the Funds. The PDS and Target Market Determination can be obtained by calling 1800 022 033 or visiting our website www.perpetual.com.au.

This podcast may contain information contributed or prepared by third parties. Any information contributed or prepared by third parties is believed to be accurate as at the time of compilation and is being provided in good faith without independent verification. PIML does not warrant the accuracy or completeness of any information provided by a third party.

To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital. All investing involves risk including the possible loss of principal.

AI, productivity and higher bond yields are challenging old portfolio assumptions. Matt Sherwood explains in this new video podcast.
AI&rsquo;s promise to lift productivity is reshaping market expectations, but with inflation pressures proving persistent and bond yields remaining elevated, Sherwood &ndash; head of investment strategy within Perpetual&rsquo;s Multi-Asset team &ndash; argues investors may need to rethink some long-held portfolio assumptions.
He discusses how AI could help Australia&rsquo;s productivity challenge but not solve it, why its investment impact is likely to be uneven, and what higher-for-longer bond yields mean for portfolio construction.
Sherwood also explains why bonds may no longer provide the same reliable defence against equity market falls &mdash; and why investors may need to place greater emphasis on quality, liquidity and downside protection in a more volatile environment.
Here&rsquo;s an excerpt from the video podcast:
&ldquo;Bonds have one job in a portfolio &ndash; to go up when equities go down.&nbsp;
&ldquo;That strategy worked well for two decades, but in 2022 a great relationship ended, and I am not referring to Johny Depp and Amber Heard, but rather bond and equity prices became positively correlated, so as yields rose, bonds took on capital losses right alongside equities.&nbsp;
&ldquo;And with yields set to stay high and volatile, that equities hedge can&rsquo;t be relied upon. The portfolio consequence here is straightforward.
&ldquo;AI could certainly help Australia's productivity problem, but I don't believe it can solve it.&nbsp;
&ldquo;AI will initially augment workers &hellip; but productivity ultimately depends on incentives, and Australia I think has lost many of the advantages that we had 20 years ago.&rdquo;
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Learn more about Perpetual's <a href="https://www.perpetual.com.au/asset-management/multi-asset/">Multi-Asset strategies</a>
Learn more about <a href="https://www.perpetual.com.au/">Perpetual</a>
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This podcast has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535 AFSL 234426.
It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider whether the information is suitable for your circumstances and we recommend that you seek professional advice.
The product disclosure statement (PDS) for the relevant Perpetual Multi Asset fund (Funds), issued by PIML, should be considered before deciding whether to acquire, dispose, or hold units in the Funds. The PDS and Target Market Determination can be obtained by calling 1800 022 033 or visiting our website www.perpetual.com.au.
This podcast may contain information contributed or prepared by third parties. Any information contributed or prepared by third parties is believed to be accurate as at the time of compilation and is being provided in good faith without independent verification. PIML does not warrant the accuracy or completeness of any information provided by a third party.
To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor&rsquo;s capital. All investing involves risk including the possible loss of principal.

Perpetual Group is an international asset manager including boutiques such as Perpetual, Pendal, Barrow Hanley, Regnan and Trillium. Each week our portfolio managers share the most interesting things they've heard from CEOs, industry leaders and analysts.

Perpetual Group is an international asset manager including boutiques such as Perpetual, Pendal, Barrow Hanley, Regnan and Trillium. Each week our portfolio managers share the most interesting things they've heard from CEOs, industry leaders and analysts.