Stanchart has released the Half- Two Global Market Outlook report dubbed ‘Keep CALM and carry on’ which seeks to guide investors on their investment options.
The report indicates the unique steps that investors need to take to ensure that they are able to navigate the challenging global and local economic situation. The report states that in this period, there will be two extreme narratives jostling for investors’ attention. First, a ‘no-landing’ scenario which argues for chasing equities higher and secondly a scenario where risky assets are not worth holding at all as a deep recession awaits.
Manpreet Gill Singh the Chief Investment Officer, Africa, Middle East, and Eastern Europe – Standard Chartered stated that the strategy is to Capitalise on market opportunities, Allocate broadly, Lean to Asia and Manage volatility (CALM).
“As we enter Half two 2023, financial markets are presenting a challenge to investors. Equity markets have surged, at least at a headline index level and our view is that they may rise further, at least in the short term. However, leading indicators of economic growth (particularly in the US) continue to paint a less optimistic picture and most major central banks remain much more concerned about elevated inflation than about weak growth indicators.”
The report further states that it is tempting to either wholeheartedly chase the surge in equities or retreat to a very conservative portfolio. Instead, investors are urged to keep CALM and maintain a steady hand in relation to their portfolios in four ways:
- Capitalise on market opportunities through overweight high-quality government bonds, upgrading equities to core allocation, lock in Investment Grade bond, yields ahead of an eventual decline in cash yields, Balance strong equity momentum vs. delayed recession risk.
- Allocate broadly by diversifying to trump concentrated approach with Gold and liquid alternatives or private assets which can help as diversifiers. In addition to ensuring a well-diversified foundation and portfolios are in place.
- Lean to Asia – The reports confirms that there is greater relative value across equities and bonds – Overweight Asia including Japan equities, Overweight Asia USD bonds, Asian assets is where value is being seen.
- Manage volatility – This is by using opportunistic allocation to manage volatility and for short-term gains Barbell sector strategies in US, Europe; consumer focus in China Cross-currency FX opportunities amid range-bound USD over 1-3 months.
The report states that by using the above methods, investors will be able to navigate the economic situation currently being faced.
Head of Affluent Banking and Wealth Management – Standard Chartered Kenya & East Africa – Paul Njoki said; “Africa remains an exciting investment destination with positive demographics, rising adoption of technology and rising consumer and business spending. With Africa set to account for 25% of the global population by 2050 – and with robust growth in key sectors, the continent offers an attractive investment proposition for international capital. Over the recent years we have witnessed most of the investment being concentrated in high-growth sectors such as tech and green energy as increasingly impact-oriented investors look for sustainable solutions to the various challenges like the climate crisis. In 2020, over half of all PE investments in the region were in the tech sector while African start-ups raised over $1 billion for the first time in 2021.
He further stated: “Despite the various impediments, realignments in global supply chains could present some opportunities for Kenya and the continent as Western economies seek new sources of energy and commodities. However, Africa will only be in a position to take advantage of these shifts and drive forward social and economic development if FDI flows level out. This means both leveraging private capital for investments in Africa’s high-growth sectors and supporting structural reforms to improve the investment climate across the region.”
Standard Chartered continues to offer market forecasts on the economic outlook to offer individuals an edge in investments and diversification of portfolio as they navigate through these dynamic times. In one of its recent reports, it alluded that equities are expected to outperform bonds over the long run. It however noted that this will have interesting implications for investors. It means that it is highly likely that an income-focused investment strategy – given the high allocation to bonds – will significantly underperform a growth-oriented strategy with its greater exposure to equities.
It is essential to gain a comprehensive understanding of the economic trends, the potential risks and challenges, the opportunities that lie ahead and developments shaping our world.