While the current investment landscape is more complex than in the years before 2018, there are still many investment opportunities, says HSBC Private Banking in its investment outlook for the third quarter of 2019.
“Investors need to be more selective than at the start of this year but we still remain invested as the economic expansion is not yet coming to an end, despite trade tariff concerns, and the Federal Reserve is ready to cut rates if needed,” says Willem Sels, Chief Market Strategist at HSBC Global Private Banking.
The resilience of the consumer, and structural growth linked to technological innovation, will particularly help sustain the economic cycle.
In the third quarter, investors can expect interesting opportunities in the consumer sector, which benefits from rising wages and government incentives in developed markets, and rising wealth and spending in emerging markets. “Structural opportunities arise from technological disruptions in areas such as healthcare and finance. In the near-term, once trade related volatility subsides, tech should again become one of the driving forces of equity market performance,” Sels adds.
In the coming quarter it is important to remain invested in a well-diversified and actively managed portfolio to benefit from the mild upside potential in equity markets we foresee, and attractive carry opportunities in credit and emerging markets bonds. To further manage the overall portfolio risk level, it can make sense to integrate sustainability considerations in the investment decisions and to tactically hedge against abrupt market developments.
In the third quarter, there will be investment opportunities in Emerging Markets hard currency bonds, which continue to provide higher yields compared to developed market bonds while often carrying lower credit risks. We particularly favour opportunities in countries such as Brazil, Indonesia, South Korea, China and the GCC. These markets offer attractive valuations and improving economic fundamentals. We especially find value in adding defensive markets into our emerging market debt allocation, such as select GCC countries, to decrease the overall risks due to their defensive nature and low correlation to other bond markets.
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