As 2017 draws to a close, investment experts have been looking into their crystal balls to assess economic prospects for the coming year and the funds and investment trusts that could benefit.
While there seems no end to the equity and bond markets’ enduring bull run and many managers remain positive on prospects for 2018, there is increasing concern among other commentators that investors could be in for a nasty shock as markets are in bubble territory.
Andrew McHattie, who runs the Investment Trust Newsletter, sums it up: ‘We still speak to plenty of managers who are positive on the prospects of extracting more value from coordinated global growth, but we are also aware of a growing hubbub of cautionary voices.’
Examples among the investment trust world include Neil Woodford, the manager of the Woodford Patient Capital Trust, who has warned that ‘there are so many lights flashing red that I am losing count’. Alastair Mundy of Temple Bar Investment Trust agrees, arguing that there are not enough cheap stocks available.
‘Conflicting views are what make markets function, of course, so we’ll see what 2018 brings,’ adds McHattie.
For those looking for inspiration – whether to exploit areas of relative value, to take advantage of successful approaches in particular markets or to position their portfolio more defensively – we’ve rounded up some ideas from leading brokers and fund managers.
Tom Stevenson of Fidelity is ‘more cautious’ looking ahead than he was in 2017, and expects ‘some more volatility in markets in 2018’. ‘After a year without even a 5% pull-back, I would be surprised if we did not see one in the next 12 months,’ he says.
He is looking for opportunities in regions that are still behind the main equity bull market led by the US, and favours Europe, where ‘sentiment remains at a low ebb, relatively speaking’. He believes the region is ‘a treasure trove of excellent companies that will benefit from the ongoing global pick-up in activity’, picking out the value-oriented Invest Perpetual European Equity Income fund. ‘If economic recovery picks up then this fund could have its moment,’ he explains.
He also recommends ‘another out-and-out stock picker’ to take advantage of what could well be a sideways-moving market, in the shape of a home-grown fund, Fidelity Global Special Situations – ‘an unconstrained global fund which can chase opportunities wherever in the world the manager finds them’.
For Asian exposure, including to the likes of the high-flying Tencent and Alibaba tech stocks, Stevenson selects Old Mutual Asia Pacific. ‘With sentiment likely to be more volatile next year, I like Old Mutual’s focus on this key driver and the manager’s ability to move in an agile way between stocks and sectors as the market mood shifts.’