Investors who want to have all their bases covered had better seek out some assets that perform like Shohei Ohtani, advises Morgan Stanley chief cross-asset strategist Andrew Sheets.
Ohtani, a 23-year-old prodigy from Japan, is an ace pitcher for the Los Angeles Angels who’s also proving his worth as a slugger. His two-way play has evoked comparisons to Yankees great Babe Ruth, among others -- and this amalgamation of offensive and defensive prowess is exactly what investors should be seeking to help them weather volatile markets, Sheets said in an April 22 note.
Otani “is valuable because of what this combination provides: the ability to both score runs, and stop them, over the course of a season," wrote Sheets. “He offers both offense and defense.” True diversification has been hard to find after the return of volatility in the first quarter of 2018 threw investors a curveball, leaving them with no place to hide, he added.
To this end, Morgan Stanley compiled a list of assets that have a low but steady correlation with global stocks, aren’t expensive to hold or buy relative to their history, and perform well during times of stress. These provide "effective defense" while "allowing the overall portfolio to play offense as well," according to Sheets.
Good news for investors: while may be a once-in-a-generation talent, right now there’s more than one place investors can go to find trades with these characteristics.
- Long S&P 500 and high yield volatility
- Short copper
- Long utilities (versus the S&P 500)
- Short the Australian dollar relative to the U.S. dollar
"The ability to play defense, without sacrificing offense, is rare," concluded Sheets. "As for Shohei Ohtani, we wish him success. Except when he’s playing the Mariners."