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Nick Petrucelli

Nick Petrucelli
Nick Petrucelli
CFA
Portfolio Manager

Industry experience

With Wellington

13
11

As a multi-asset portfolio manager, Nick contributes to the active multi-asset research effort of the firm, with a particular focus on cross-asset relative value. His investment philosophy is long term and contrarian in nature, and combines the discipline of systematic frameworks with differentiated fundamental insights drawn from across Wellington’s investment platform. His research is incorporated into a range of long-only and long/short multi-asset portfolios. Nick supports the Opportunistic Investment Team by focusing on contrarian investment opportunities that arise from global imbalances and long-term structural themes, as well as helping with internal manager selection. He is also a portfolio manager for the firm’s inflation hedging and target-date strategies. In addition, he has a background in strategic asset allocation, including authoring research papers on portfolio construction and conducting manager research.

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Figure 1 highlights the six-month trailing correlation between the S&P 500 Index and the 10-year US Treasury bond as of 20 July 2021. This stock-bond correlation has shot up over the past six months or so from near all-time lows to its highest levels since before the 2008 global financial crisis. What does it mean?

Figure 1

Six-month stock-bond correlation

First, one caveat: The equity-bond correlation can be volatile, particularly amid fears of monetary policy tightening — for instance, a sharp spike around the…

MACRO
MARKETS
Nick Petrucelli
Nick Petrucelli
CFA
Portfolio Manager
Boston

“We suggest that a budget constraint be replaced by an inflation constraint.”
— Three MMT economists in a 2019 letter to the Financial Times

MMT in a nutshell

Modern Monetary Theory (MMT) is often dismissed as a fringe concept regarding unlimited government spending, but it’s a bit more nuanced than that. Basically, MMT holds that a nation’s budget doesn’t (or shouldn’t) really constrain spending because the government can always print more money if needed. Thus, it’s the “real” economy — the production, purchase, and flow of goods and services — that truly matters.

Taking it a step further, the government can theoretically spend as much as it wants to until said spending begins to create excess demand, thereby generating inflation, at which point the government should…

MACRO
MARKETS
Nick Petrucelli
Nick Petrucelli
CFA
Portfolio Manager
Boston

Inflation has become a top-of-mind topic for clients in recent months, with many exploring ways to position for potentially higher inflation in the period ahead. However, after a decade of “disinflation,” we believe the investment community continues to anchor to the prior regime and to some stubborn misconceptions around inflation hedging. Here are five that could prove costly if, in fact, inflation does rise.

Misconception #1: You can wait to allocate to inflation hedges until we have higher inflation.

Reality: Timing when to buy inflation-related assets is just as difficult as trying to “market time” any other type of investment. That’s why investors are advised to hold strategically diversifying assets like stocks and bonds and, in our view, should also own inflation-sensitive assets as a long-term, strategic portfolio allocation. As with any asset, the fundamentals are…

MACRO
THEMES
Nick Petrucelli
Nick Petrucelli
CFA
Portfolio Manager
Boston
David Chang
CFA
Commodities Portfolio Manager
Boston

The massive amounts of fiscal and monetary stimulus injected into the global system last year have sparked debate around the prospect of potentially higher interest rates going forward. And the financials sector often tops the list of likely equity-market beneficiaries in a rising-rate environment.

Our take? Without trying to make a “call” on the interest-rate outlook, we see a compelling relative return opportunity in some interest-rate-sensitive financials — select multinational banks, insurers, and diversified financial service names — with strong fundamentals and underlying growth metrics.

It’s about the fundamentals

Understandably, the financial sector’s chronic underperformance and multiple “head-fakes” toward a possible recovery over the past five to 10 years make it difficult for many investors to…

MARKETS
THEMES
Daniel Pozen
Dan Pozen
Equity Portfolio Manager
Boston
Nick Petrucelli
Nick Petrucelli
CFA
Portfolio Manager
Boston

With the prospect of a Democratic sweep looking more and more plausible with each passing day leading up to the US election, some observers note that such an outcome could usher in major policy shifts in taxation, health care, energy, and perhaps tech regulation for 2021 and beyond. Should investors start repositioning their portfolios accordingly? Not so fast.

Nick Petrucelli’s macro insights

I tend to be skeptical of government policy-driven trades playing out to the extent that financial markets often anticipate. Indeed, there have been several political changes in recent years whose impact on assets has turned out to be fleeting and, in some cases, just the opposite of…

MARKETS
Nick Petrucelli
Nick Petrucelli
CFA
Portfolio Manager
Boston
David Lundgren
David Lundgren
CMT, CFA
Director of Technical Analysis
Boston

To me, one of the striking features of the current US stock-market rally is that many investor sentiment and positioning indicators have stayed depressed, even as equity prices have surged. (Some indicators have risen of late, but the ones I pay the most attention to have not.)

To a degree, the weak sentiment is understandable, given the massive blow that COVID-19 delivered to the economy and financial markets. It’s also quite plausible that the recent spike in unemployment could have adverse economic knock-on effects, potentially causing equities to reverse course. On the other hand: 1) we may have reached a nadir in growth; 2) the market itself bottomed seven weeks ago; and 3) the US policy response to the crisis has been swift and aggressive. Perhaps the market won’t…

MARKETS
Nick Petrucelli
Nick Petrucelli
CFA
Portfolio Manager
Boston
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