Since Donald Trump’s return to the US presidency in January 2025, the global economy has faced significant challenges due to the introduction of protectionist policies and trade tensions in the largest global economy. The European Union has announced that it will respond with countermeasures worth EUR 26 billion, which are expected to affect normal trade with the United States from April. This reversal in US trade policies is contributing to a fragmentation of global economic relations, increasing volatility in the financial markets and creating additional challenges for global economic stability.
Therefore, institutional investors, banks, pension funds, management companies, insurance companies and private investors need to calibrate their strategies to protect their portfolios from potential risks and to make them resilient in stressful situations, in the short, medium and long term – as well as to be able to take advantage of the market opportunities that will arise from this volatility. Generally, the strategies do not seek to predict the future, but to create a portfolio capable of adapting and thriving in any economic scenario, providing consistent returns and protecting the investor against crises.
Bridgewater Associates, the world’s largest alternative investment management company, founded by Ray Dalio in 1975, created a strategy in the 1990s called All Weather, designed to offer stable and resilient returns in any economic condition, protecting assets over the long term. The central concept is risk-based diversification and not just traditional capital allocation. Rather than simply dividing capital between different assets (such as shares and bonds), the strategy distributes risk evenly between different asset classes, taking into account their performance in different economic scenarios.
The strategy assumes that markets are influenced by two main factors: economic growth and inflation, which can be up or down, resulting in four different economic regimes. When economic growth is strong, companies profit more and consumption increases, benefiting shares and commodities, which tend to appreciate in value. In periods of recession, economic activity slows down and investors seek safety in fixed-income securities, especially those of stable governments, which usually benefit from falling interest rates. In high inflation scenarios, the purchasing power of the currency decreases, favouring assets that preserve value, such as commodities and inflation-linked bonds, which adjust their returns in line with rising prices. Finally, when inflation is low or deflation occurs, interest rates tend to fall, boosting the price of long-term bonds and, in some cases, shares, which can benefit from lower costs and a more predictable economic environment.
The All Weather method emphasises diversification between asset classes and geographical regions to reduce risks and seek stable returns.Asset allocation is based on risk, not capital, balancing recession and inflation risks
The All Weather method emphasises diversification between asset classes and geographical regions to reduce risks and seek stable returns. Asset allocation is based on risk, not capital, balancing recession and inflation risks by investing in global liquid assets. Utilises capital-efficient portfolio engineering, employing derivative financial instruments such as futures, options and swaps to leverage exposure to assets beyond the initial outlay. Aimed at long-term investors, the objective is to build a portfolio that is resilient to different economic scenarios, preserving and increasing wealth without the need for market timing. It usually includes shares, debt securities and others indexed to inflation and commodities. The portfolio is rebalanced annually to maintain the risk profile and adjust to market changes. An example of an ETF that follows this strategy is the SPDR Bridgewater All Weather ETF (ALLW), which began trading on 7 March 2025. Its benefits include risk mitigation through diversification, the search for stable returns in different economic conditions, simplicity in implementation and the possibility of solid long-term performance.
In Mozambique, the implementation of this strategy is very limited, due to the limited liquidity and shallow depth of the Mozambican capital market. Most liquidity is traded in public debt securities and the stock market is very small and unimpressive. Although there has been an increase in the issue of private debt securities in recent years, they are still not enough to help diversify portfolios.
The quest to optimise portfolios means that it is imperative to start considering investment in other geographies, with the constraints that the exchange rate law is currently causing. Only by taking this step can we hope to have sufficient instruments to provide Mozambican investors with diversified portfolios, with the All Weather strategy or other strategies aimed at mitigating risk and boosting more stable future returns.
