2018 – a year to make hay while the sun shines

31 January 2018

Investors should position to make hay while the sun shines in 2018, with an eye to gathering clouds over the horizon.

That was the broad consensus from Money Management’s Investment Analyst Forecast Forum webinar held yesterday and which can be watched on-demand here: Investment Analyst Forecast webinar, with Insight Investment product specialist, Adam Kibble reflecting when he said his firm believed the environment remained supportive of growth assets enabling Insight to retain its overweight position.

“But this ‘Goldilocks’ environment will not last forever,” he said, stating that Insight remained watchful.

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In particular, he said Insight Investment were focused on

  • The macro data remaining supportive – purchasing managers indices shifting to a moderating regime
  • Corporate earnings – with high valuations earnings need to surprise to upside (current season is progressing well with 71 per cent reported thus far beating expectations)
  • Understanding where we are in the investment cycle and keeping an eye on potential sustained increase in volatility and stock correlations
  • The potential for a central bank policy error leading to expectations of a downturn.

Kibble’s assessment was largely backed by keynote speaker, Stephen van Eyk but he pointed to the adverse factors capable of impacting investors as they progressed through the year.

van Eyk noted that bond funds were vulnerable to increasing spreads and rising rates in early 2018, while global stock markets were over-valued meaning they would be relying on future growth.

On the China front, van Eyk said that although the Chinese authorities were cutting back on credit to corporates, reducing output, imports would continue to rise creating global growth.

He said that Australia would suffer from reduced demand for commodities, while Asian emerging markets would continue to provide the best avenue to access this growth.

Premium China Fund’s Jonathan Wu endorsed much of van Eyk’s assessment with respect to China and pointed to the benefits which would flow from the significant deleveraging that had occurred.

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