Stay invested, says expert
Dubai, June 10, 2010
Investors should hold a full complement of risk assets, and all portfolios should contain some investments that will do well if the recovery falters, said a financial expert.
“The upside and downside risks now look more equally balanced than they had previously appeared,” said Khurram Jafree, head of investment advisory Mean at Barclays Wealth, the global wealth management institution.
The June Compass edition from Barclays Wealth, which provides a set of recommendations based on quantitative as well as qualitative research, projects a continued view for global economic recovery with corporate profits leading the way.
Investment recommendations for the month of June include tactical asset allocation (staying over weight equities) along with an investment call for investors to go long Swedish krona and short Euro.
Compass’ June research also looks at how the global economy continues to recover, with corporate profits leading the way. The overweight position in equities is smaller than it was, but stocks remain the preferred core asset class, it said.
The report suggested that investors should not rush into selling equity portfolios and remain invested.
Equity markets look to offer long-term value at these levels, but in the very short term, it may be a good idea to take a step back and wait for things to calm down, according to the report.
“Early last month we reduced the equity overweight in our model portfolios. Over a six-month period, our strategists still expect global equities to outperform other assets – particularly cash,” said Jafree.
“However, they recommend to wait for volatility to subside before committing new funds and would urge that investors retain a full weighting in high-quality long- duration government bonds to provide some protection if growth falters” he added.
Compass also highlights a slow and halting recovery in the Euro-zone and continuing concerns about the region’s long-term structural challenges will cause the euro to remain under downward pressure.
Barclays Wealth prefers selling the euro against a number of other European currencies, especially the Swedish krona (SEK), since Sweden is likely to grow faster than the euro area, the currency looks undervalued, and the government’s deficit and debt ratios are relatively well-behaved, the report said.
“Our strategists expect that Sweden’s growth outlook will support the krona,” Jafree continued.
“Although the Swedish economy suffered badly in the recession, mainly due to the sharp fall in investment spending, we expect it to grow more strongly than the euro area this year,” he concluded. – TradeArabia News Service