Robert St Clair Strategist, Fullerton Fund Management
22 July 2022
Investors should have defensive strategies in place to manage downside risks, while remaining attentive for opportunities – there are still relative winners in tough markets.
Equity regions are sufficiently differentiated, which is likely to provide attractive opportunities and relative trade ideas. We are positive on sectors with well-established drivers, like technology, e-commerce, consumer products, healthcare, financials, and renewables. There is further scope for defensives to outperform cyclicals, especially in Developed Markets (DM).
Local Asian bond investors who intend to hold to maturity, may start to find the relatively higher real yields across some Asian markets attractive. Government bonds may benefit from falling yields due to weaker growth.
We prefer Investment Grade (IG) over High Yield (HY), given the relatively stronger balance sheets of IG firms in a weaker growth climate.
The global economy can transition from its stagflationary environment into a soft landing, but we are preparing for the prospect of a global recession, led by DM, where high inflation continues to cause spending to fall and unemployment to rise eventually.
Policy stimulus may be too late to avoid a recession, but it should help drive recoveries, which typically creates significant alpha opportunities for investors.
Hear from our Strategist Robert St Clair, who outlines selective opportunities and relative trade ideas to pay attention to, in the current climate.