Investors should focus on quality

The remainder of 2021 is expected to be challenging with potential key themes of guarding for inflation, searching for income, seeking quality companies as well as looking beyond stocks and bonds, according to Franklin Templeton.

The manager said that in the coming months active management would be important however the opportunities across corporate credit markets would be selective and uneven and investors should consider sector, duration and quality rotation.

Following this, investors should focus on equity “quality” across styles and market capitalisation as the “junk trade” was over and quality should be the priority beyond structured definitions of growth and value.

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According to Franklin Templeton, real estate saw straightforward mechanism of raising rents under improving economic conditions allows properties to adapt to economic supply and demand and this mechanism would make commercial real estate particularly interesting in the second half of this year.

“We expect the remainder of 2021 will be challenging. Returns will be harder to come by, but should still be positive, in our view,” Brandywine Global portfolio manager, Brian Kloss, said.

“Overall, we are constructive on corporate credit, especially the shorter end of the curve. Pro-cyclical sectors, such as commodities, basic materials and health care technology, provide interesting opportunities.

“We believe active management will be key, as the opportunities across corporate credit markets will be selective and uneven. Investors will need to use all the tools in their toolkits, including sector, duration and quality rotation.”

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