Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

The big calls 8 wealth managers have made this quarter

We recently asked wealth managers where they were finding the best opportunities in the second quarter of 2018.

James Rowbury

Investment research coordinator, Redmayne Bentley, Leeds

Conviction across all regions and asset classes is proving hard to come by, but if anything has an improving outlook, it is emerging market equities.

Nearly 18 months after the US imposed safeguard tariffs on Chinese imports, a deal looks ever more likely. 'We’re getting into the end-game stage' were the words of the US’ negotiator Myron Brilliant following the latest round of talks.

Emerging markets saw a marked sell-off throughout 2018, with the MSCI EM index falling 26.57% from its highs. Of course, we can’t put all the blame on politics; data coming out of China has been lacklustre to say the least. Yet, economic reforms and a raft of Chinese stimulus measures are helping to boost sentiment in the near term.

I still feel the biggest risk remains in the final trade talks; these could prove more contentious, so we can’t get complacent. However, near-term resilience in corporate earnings and more realistic equity valuations can give comfort to those looking to drive some short-term upside.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

James Rowbury

Investment research coordinator, Redmayne Bentley, Leeds

Conviction across all regions and asset classes is proving hard to come by, but if anything has an improving outlook, it is emerging market equities.

Nearly 18 months after the US imposed safeguard tariffs on Chinese imports, a deal looks ever more likely. 'We’re getting into the end-game stage' were the words of the US’ negotiator Myron Brilliant following the latest round of talks.

Emerging markets saw a marked sell-off throughout 2018, with the MSCI EM index falling 26.57% from its highs. Of course, we can’t put all the blame on politics; data coming out of China has been lacklustre to say the least. Yet, economic reforms and a raft of Chinese stimulus measures are helping to boost sentiment in the near term.

I still feel the biggest risk remains in the final trade talks; these could prove more contentious, so we can’t get complacent. However, near-term resilience in corporate earnings and more realistic equity valuations can give comfort to those looking to drive some short-term upside.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Daniel Adams

Head of fund research, Psigma Investment Management, London

My investment call for Q2 would be emerging market debt. The volte-face of Fed policy at the turn of the year, in the face of some alarmingly weaker economic data out of the US, has put to bed calls for an aggressive tightening cycle, at least in the near-term.

Indeed, the market is now pricing in the next move as a cut rather than a hike, leading to a softening in the US dollar.

In addition, the Chinese stimulatory measures last year now appear to be feeding through to the economy and the data looks to be improving at the margin.

These two major headwinds that have held back emerging markets assets for some time, look to be shifting to favourable tailwinds. Furthermore, any signs of a thawing of China/US relations should add further fuel to the EM story.

Finally, I’m encouraged by how under-owned the asset class is, after several years of substantial net outflows. With local emerging market debt (EMD) now yielding circa 6.5% and hard EMD yielding around 5.5%, we think one is being attractively compensated for the risk.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Gordon McAndrew

Senior investment director, Investec Wealth & Investment, Edinburgh

One area of particular interest is emerging markets, which have begun to find their feet again after a torrid period for most of 2018. Trade war concerns were to the fore, but they also suffered from the relentless strength of the US dollar, although Federal Reserve’s policy U-turn has dramatically reduced the threat, and policy reflation in China should also bear fruit.

With little sign of the complacency that preceded the market sell-off in the early part of 2018, valuations below long term averages and more positive signs emerging on the strength of the Chinese economy, a resolution to the 'trade wars' spat could well be the catalyst for a resurgence in emerging markets in the coming quarter.

We continue to see attractive relative value here. The demographic trends are strongly supportive of longer term growth prospects and going into Q2 we are advocating an overweight stance.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Nathan Sweeney

Senior investment manager, Architas, London

With some markets up in double digit territory in the first quarter and a number of risks still at play, we are happy to book some profits and reduce risk in equities by going from neutral to a moderate underweight position.

Along with a defensive portfolio construction stance within our equities and fixed income allocations, we emphasise the importance of alternatives in providing low correlation to both equities and bonds and therefore a valuable source of diversification.

Within equities, we have moved from a slightly overweight to a neutral position in emerging markets. Gradually slowing Chinese economic growth and US trade uncertainty could hurt stocks, although they still look fairly good value relative to other regions.

The outlook for UK stocks remains mixed. If the political backdrop becomes more stable, it could help improve investor confidence in the region.

But this still looks like a fairly distant possibility given the ongoing Brexit debate.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Rob Morgan

Pensions & investments analyst, Charles Stanley Direct, London

Markets have rallied, at least in part, on the prospects of a better trade deal between the US and China, but is it a case of it being better to travel than to arrive?

Improvements in trade relations between the two largest economies may turn out to be partial rather than comprehensive. There may well remain issues over enforcement and whether the deal will genuinely improve matters.

Whatever happens, tensions between Beijing and Washington over technology transfer are likely to remain. This is a key risk for equity markets this quarter, especially those that have led the charge, as the likelihood of a positive outcome now seems priced in following a vigorous rally since the start of the year.

If you are bullish on Chinese shares or the US technology sector, the resolution of the trade dispute should not be the key reason.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

John Leiper

Head of portfolio management, Tavistock Wealth, London

Global equities appear to be ignoring the warning signs flashing in bond markets and have risen more than 12% in 2019 – the best start to a year in almost two decades.

We believe the bond market is overly pessimistic, and Q2 will mark the inflection point as we return to above trend global growth later in the year. Inflation remains subdued, and interest rates will stay low for some time. So despite the strength of recent gains, equities remain our preferred asset class.

Within equities, we prefer emerging market exposure, particularly China, where sentiment surrounding the US-China trade talks remains positive.

Stronger than expected PMI data this weekend, the inclusion of Chinese A shares in the MSCI EM index and accommodative policy out of Beijing should continue to support the asset class into Q2.

Alternative China plays include European and Japanese equities. which offer indirect exposure at attractive valuations.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Edward Park

Deputy chief investment officer, Brooks Macdonald, London

At the start of the year, we were becoming quite concerned about the global outlook. These concerns were driven by the squeeze in US dollar liquidity caused by the twin impact of a growing treasury issuance to fund the widening US budget deficit and quantitative tightening (QT).

With the 'Powell Pivot' now stopping QT in September, and with what looks like a bottoming in global manufacturing PMIs, we are becoming more constructive on risk assets.

Bond yields have been steadily falling with the 10-year US Treasury, around 2.5%. At the same time, the earnings yield on the US market is around 6%, so the effect of the central bank shift means that, yet again, equities are far more attractive than bonds.

With strong consumer sentiment and some of the most resilient economic growth, we retain an overweight to US equities, with a particular preference for the technology and healthcare sectors.

We also have an overweight position in emerging Asia equities, reflecting expectations of an improvement in US/China trade relationships and cheap valuations in the region.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Rob Lambert

Investment manager, WH Ireland, Poole

Today’s markets are full of contradictions. Equities are largely pricing in a very benign outcome to the current economic cycle, but swathes of the fixed income space appear to be discounting, at the very least, a fat recessionary tail. Geopolitical event risk also appears largely priced out.

The current setup underlines the need to stay diversified, but history suggests that today’s apparent divides are unlikely to be resolved quietly. This has remained largely unpriced, with only fixed income implied volatility showing a significant – but now declining – pickup. It seems likely the market will be quiet again in the months ahead.

Accordingly, we have been actively adding to upside volatility capture in our models within the alternatives space, while being mindful of the underlying exposures. 'Volatility of volatility' is now a structural feature of markets and we need to be positioned for the next upturn.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play How Kames Property Income got Brexit-ready

How Kames Property Income got Brexit-ready

Kames Property Income co-manager Richard Peacock says the fund is positioned to withstand the widely anticipated Brexit redemption stampeded.

Play Citywire 20: John Dodd's great Artemis expedition

Citywire 20: John Dodd's great Artemis expedition

Citywire executive chair Lawrence Lever sat down with Artemis founder partner John Dodd.

Play Citywire 20: Investec's du Toit on managing the 'jerk factor'

Citywire 20: Investec's du Toit on managing the 'jerk factor'

Investec boss Hendrik du Toit believes he has become far more decisive over the last 20 years, especially when it comes to managing 'jerk' factor.

Read More
Your Business: Cover Star Club

Profile: how Brighton Capital joined Brewin, Barclays and UBS alumni

Profile: how Brighton Capital joined Brewin, Barclays and UBS alumni

‘I’m a mini business inside a mini business,’ says Sylvia Bowen, describing her new role at boutique Brighton Capital Management.

Wealth Manager on Twitter