Equities remain attractive despite volatility
Equities remain attractive as the effects of monetary and fiscal stimulus are expected to stay through 2022, signalling a tailwind for strong economic growth, according to Fidelity portfolio manager, Paul Taylor.
According to Taylor, some of the best-positioned equities to prosper were those which were set to benefit from the re-opening trade and which had healthy balance sheets, including those involved with e-commerce, food delivery, the cashless transition, leisure travel, leisure events and hospitals.
“People don’t often think of hospital operators as a reopening trade – they also were quite hit through COVID because a lot of your elective surgeries were cancelled or delayed,” Taylor said.
He said investors should question their equities which were linked to business travel as he expected a reduction in this space compared to pre-COVID due to the continuation of the working from home movement.
Market-based financials including private equity and credit markets as well as “special situations” like insurance markets were also in a good position for long term growth, Taylor said.
“Because you’ve had a range of different catastrophes or events that have tightened the market and tightened capital... and we’ve seen premiums go up across the board,” he said.
He believed interest rates would pick up slower, as the Federal Reserve, and by extension the rest of the world, would have learned from the mistakes made by their rapid response to bottoming interest rates in 2016.
Therefore, in the early phase, equity markets would benefit from a slower rates-rising environment as investors would see the economy doing well.
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