Investment View Q2 2017
Market valuations are dear, especially in the U.S. The inexperienced Mr. Trump could cause damage to stability and investors’ confidence. Central banks have to move very carefully withdrawing liquidity to maintain stability in the financial systems. Any set-backs in stock markets should be carefully analyzed to avoid traps. Basically, investors should stay optimistic for the moment as global growth is returning, jointly pulled by all major economic regions.
In this scenario, security selection and regional focus will be the drivers for returns. New technologies will continue to be developed and there are many investment opportunities especially among smaller companies in Europe, U.S. Large capitalization companies will continue to struggle with revenue growth. Financials should perform, especially in Europe. Real assets such as Commodities and Real Estate represent value, as do emerging market stocks and more specifically Asian equities including Japan.
Alternative fund strategies in mergers & acquisition arbitrage, credit and volatility will continue to be an attractive diversification in any portfolio.
We remain positive on several secular growth themes; 1) Software & Robotics should receive a core exposure as companies are continuously cutting costs and manufacturing will become essentially software based. 2) Security is a major issue and increasingly present to governments and large multinationals. 3) Payment systems will undergo material changes moving from physical to digital. 4) Monitoring and connectivity are getting increasingly more important as machine to machine communication takes off in sectors as healthcare and automotive.
At this stage of the cycle, equities are still the preferred investment class over generally bonds, the latter offering little value.