July 2016

What’s most attractive in an unpredictable market?

“Sell in May and go away.” Do you agree with this oft-cited investment strategy? How will the global market be in the second half of 2017? In view of the fluctuating market, it may be more important to understand the market trend and be prepared when opportunities arise. Check out what experts say about the market and get some insights about the global investment market. 


The following article is provided by PineBridge Investments:

The current Fed rate hike cycle and political uncertainties in Europe are making markets jittery, but we believe that selective global stock picking, especially across the consumer and IT sectors will continue to perform strongly.

While commodity prices are off their bottom, they should remain low due to excess capacity added at the tail end of the “super cycle.” While the latest fall in prices added further pressure to commodity producers – leading to sudden and severe cuts in jobs and capital spending, the low commodity prices should help consumers, who also should benefit from healthy labour markets, gradually reviving wage growth, rejuvenated household balance sheets and low borrowing costs.

Consumer confidence creates opportunities 

Demographics will soon morph from a headwind to tailwind. Baby boomers are moving out of their high-saving, final employment years and into the dis-saving years of retirement. Replacing them is an equally large cohort of millennials who, despite high student debts and a propensity to save, should begin spending more freely as they become more confident in their income prospects. 

Recent data from US banks and credit card companies show an increase in lending and a boost in consumer confidence. This increase in spending is not yet playing out in the retail sector. There is evidence, however, that consumers are increasing their expenditures in leisure, healthcare and technology. People are eating out more, upgrading their broadband and spending on their smartphones.

Chart: US Consumer Confidence and Real Spending

Source: Thomson Reuters Datastream, Bloomberg, Pinebridge Investment Calculations as of 11 April 2016

IT sector has the momentum

In terms of an investable trend, smartphone penetration is at very high levels so we do not expect a significant growth in that market. What we are seeing is that the amount of time people spend on their phones is reaching new highs, as people use their phones for more and more activities. The way to access this theme is generally through service providers rather than hardware providers.

More broadly, across the IT sector, we are seeing opportunities in companies that are positioned to benefit from growing data consumption in both the fixed and mobile segments as well as investing in cloud-based solutions.

Focus on long-term trends and the well-managed companies

From a macroeconomic perspective, we expect global markets to remain choppy, driven by low growth, low inflation, and central bank uncertainty. The effects of central bank actions, when they come, are increasingly short-lived and highly anticipated. This means investors should focus on longer-term trends and companies that can be analysed and are well-managed. The recent improvement in trade and industrial activity in China, combined with much more attractive equity valuations in much of Asia, are driving us in this direction.

About PineBridge Investments: 

PineBridge Investments is a global asset manager with offerings that span the asset class and capital structure spectrum.

  • US $82.5 billion in assets under management (as of 31 March 2016)
  • Investment capabilities in multi-asset, fixed income, equities and alternatives
  • Global client base that includes institutions, insurance companies, intermediaries and individuals

Disclaimer:

  • The article above is provided for general information purposes only. It does not constitute a recommendation to pursue any investment strategy or take any other action.
  • All investments involve risk. Past performance is not indicative of future results. In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved.
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