Economic ‘peak opportunity’ is likely to be late Quarter 1 for most major developed economies, and when investors might be rewarded for taking the plunge, predicts the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organisations.
The prediction from deVere Group’s Nigel Green comes as global investors review their portfolios with their advisers for the year ahead.
“Economic ‘peak opportunity’ might come late in the first quarter. Until then, unemployment will be rising and there will still be aggressive language from the central banks on the need to stamp out inflation – which by then will be sharply down from current levels, especially as demand for staff is falling fast and this will help ease wage inflation, but it will still be well above the 2% target set by the central banks,” says Green.
The second quarter of the year might see risk assets start to price in a cyclical upturn in the G7 economies. “This is, perhaps, when stocks will reach their cyclical bottom, and when investors might be rewarded for taking the plunge.”
“The assets that have fallen hardest between now and then maybe the strongest performers during this recovery rally, with the best performing days probably at the start. “There will be cyclically-sensitive sectors, such as industrials, consumer discretionary and autos,” says Nigel Green.
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What might trigger this recovery? “Probably central banks’ ending of rate hikes, and easing of rhetoric on inflation, as it slowly makes its way down to the 2% target rate in the major western economies, companies cutting back fast, together with signs of economic stabilisation.”
Investors should remain diversified, affirms the CEO of deVere. There is no ‘right way’ to approach investing, since each individual’s attitude to risk, and time horizon differs. However, a disciplined approach to putting money into the markets, ignores current trends, when the outlook for corporate earnings and interest rates is so opaque. Investors should remain diversified in multi-asset portfolios, that offer exposure to equities, bonds and alternative asset classes.
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“Holding cash is tempting, but it suggests an ability to ‘time the market’, to invest it at an optimum point in the cycle, and this is nearly always impossible. Investors should be starting to position themselves for the cyclical upturn,” he concludes.