Geopolitical changes are creating the ideal investment environment for stock pickers, according to industry experts from Zurich, Fidelity, Verbatim, and Orbis Investments, speaking at the most recent SimplyBiz Group Advice Show.
The panel discussed the impact of global volatility, international trade wars, US market concentration, opportunities in Emerging Markets, and how advisers should be tackling these challenges.
Dan Brocklebank, Head of Orbis Investments in the UK:
“No investment is safe if you pay too much for it in the first place, so even in current conditions, the risk of loss is bigger than the risk of volatility. It’s a matter looking for cheap stocks and then considering the risk around them, with diversification as important as it has ever been.
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“For example, there are selective opportunities in tech, and computer game developers in particular, but I wouldn’t buy the market across the board. People have been complacent with the markets and types of assets they are looking at, but now should be considering valuations all over the world.
“Investors need to be keeping the ball in play at time when pessimism surrounds, by being willing and able to buy when there are opportunities.”
Guy Miller, Chief Market Strategist & Head of Macroeconomics, Zurich:
“There has been a real tightening of markets as a result of the geopolitical headwinds, as previously overlooked issues now have more of an impact.
“We’re late in the market cycle, but there is still a way to go until we’re at the end of this run. Bond yields are overvalued, but equity markets are in good shape, despite there being plenty of expensive assets making investment decisions difficult. This is all in the context of an indebted world being distorted by quantitative easing.
“Lots of companies are doing well in this environment, so this really is a stock pickers market right now”
Bill McQuaker, Portfolio Manager, Fidelity Multi Asset:
“It is appropriate to have a level of caution, but if markets do pick up, it is a great opportunity for people to get involved – it’s essential for investors to be in a position to take advantage of the current low prices.
“It is worth favouring defensive markets though, and perhaps even taking on a more contrarian style, looking for stocks that have been through the wringer, reducing their value.
“Keep an eye on the semiconductor market cycle, as that would be one of the first places to see signs that the wider market is beginning to deteriorate. Semiconductors are at the heart of the tech market, so it would really rattle people’s confidence to see a downturn.
Sheldon MacDonald,Deputy Chief Investment Officer, Architas and Co-Fund Manager of the HC Multi-Index Funds, Verbatim Asset Management:
“It’s an alarming indicator of the state of the US market that only ten stocks are responsible for almost 100% of the growth there.
“In Emerging Markets, the opportunities are more difficult to find, as there isn’t really any obvious upside. China’s recent move back into a bear market does bring the valuation angel back on to the table though.
“There is the potential for the trade wars to have more impact, but there hasn’t been much follow through on the heating rhetoric. It does need to be monitored though, as any changes in the status quo will follow through to affect company profitability.”