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The French bank said Thursday that it was making some significant changes to its multi-asset portfolio ahead of the new year and is heavily weighted toward sovereign debt compared to equities and commodities. The bank also said that it is reducing its cash position to zero. As to how high the Fed Fund's rate will go, the economists said that market expectations of a terminal rate close to 5% would be appropriate. They added that that would bring real interest rates up to 1.5% to 2%.
As SocGen increases its exposure to government and corporate debt, it is also slightly reducing its commodity holdings to 9%, down from 10% in September. Gold still makes up the biggest portion of its commodity position, but has been reduced to 6%, down from 7% in September. "Systemic risks are a common feature after a round of policy tightening of this kind," the analysts said. "Holding gold and CHF can help stabilize portfolio volatility, in our view.
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