LONDON (Reuters) - Fund managers are touting investments in “value” stocks, U.S. bonds and cash dollars in 2019 to weather an expected slowdown in global growth led by the United States and a possible pause in interest rate hikes.
As the impact of fiscal stimulus fades and trade tensions bite, concerns about the trajectory of economic growth have caused wobbles in financial markets and particularly technology stocks, which will see earnings hit next year, investors said.
Speaking at the Reuters Global Investment 2019 Outlook Summit, Carmignac Gestion Managing Director Didier Saint-Georges said investors should turn to dollars and defensive stocks, which are less correlated to the business cycle such as utilities and food and beverage firms.
Investors said the U.S. Federal Reserve could pause its rate hiking cycle with an economic slowdown, and the European Central Bank could backpedal on its 2019 rate rise commitment.
A pause in policy tightening would make longer-dated bonds attractive and spur buying of so-called “value” shares, which are stocks that tend to trade at a lower price relative to fundamentals such as dividends, earnings and sales.
Pascal Blanque, who oversees funds worth 1.5 trillion euros ($1.7 trillion) at Europe’s biggest fund manager Amundi, said he was adding U.S. debt and high-dividend stocks to his portfolios.
“I think we have seen the bulk of the upward pressure on interest rates and the dollar,” he said.
Funds investing across asset classes have had to deal with October’s slide in global stock markets and pressure on bonds. This year a 50-50 basket of global stocks and debt is set for its first annual loss since the 2008 financial crisis.
GRAPHIC: Portfolio returns - tmsnrt.rs/2QL1H3E
Mark Haefele, global chief investment officer at UBS Wealth Management, said he was advising clients to allocate more funds to alternative assets, such as real estate, that did not move with bonds and stocks.
“Where there is a risk of upside surprise to inflation, there is a risk bonds and stocks will fall together and balanced portfolios won’t work out that well,” he said.
Valentijn van Nieuwenhuijzen, chief investment officer at NN Investment Partners who helps manage 240 billion euros ($271 billion), said selloffs in February and October showed technical rather than fundamental factors were driving markets.
He said he was investing in stocks such as Chinese and U.S. technology shares that were among the hardest hit when markets slid. “For our equity portfolios next year, we are more inclined to be positive than negative,” he added.
Market participants said valuations were expensive, so disappointing economic data could trigger another selloff.
GRAPHIC: Value Growth chart Nov 15 - tmsnrt.rs/2QK5TAJ
Stephen Jen, co-chief investment officer at London-based hedge fund Eurizon SLJ Capital, said his concerns included a pick-up in U.S. inflationary pressure that would, in turn, prompt a Fed response.
A slowdown in the global economy next year would prompt investors to take refuge in assets deemed to be safe havens, he said. “Dollar cash is a very valid asset class now and for the first time in many years it has outperformed stocks and bonds.”
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Reporting by Saikat Chatterjee; Additional reporting by Helen Reid; Editing by