Economic "peak opportunity" is likely to occur in the late first quarter for most major developed economies. This is when investors might be rewarded for taking the plunge.
Until then, unemployment will be rising, and there will still be aggressive language from the central banks on the need to stamp out inflation — which by then will be sharply down from current levels, especially as demand for staff is falling fast and this will help ease wage inflation. However, it is important to note that it will still be well above the 2% target set by the central banks.
This is, perhaps, when stocks will reach their cyclical bottom, and, as such, when investors might be able to reap the financial benefits for their portfolios.
The second quarter of the year might see risk assets start to price in a cyclical upturn in the G7 economies.
The assets that have fallen hardest between now and then may be the strongest performers during this recovery rally, with the best performing days probably at the start.
There will be cyclically sensitive sectors, such as industrials, consumer discretionary and autos.”
What might trigger this recovery? Probably central banks’ ending of rate hikes, and easing of rhetoric on inflation, as it slowly makes its way down to the 2% target rate in the major western economies, companies cutting back fast, together with signs of economic stabilization.
Investors should remain diversified. There is no "right way" to approach investing, since each individual’s attitude to risk, and time horizon, differs.
However, a disciplined approach to putting money into the markets, that ignores current trends, when the outlook for corporate earnings and interest rates is so opaque. Investors should remain diversified in multi-asset portfolios, that offer exposure to equities, bonds and alternative asset classes.
Holding cash is tempting, but it suggests an ability to "time the market," to invest it at an optimum point in the cycle, and this is nearly always impossible. Investors should be starting to position themselves for the cyclical upturn.
London-born Nigel Green is founder and CEO of deVere Group. Following in his father’s footstep, he entered the financial services industry as a young adult. After working in the sector for 15 years in London, he subsequently spent several years operating within the international space, before launching deVere in 2002 with a single office in Hong Kong. Today, deVere is one of the world’s largest independent financial advisory organizations, doing business in 100 countries and with more than $12bn under advisement. It specializes global financial solutions to international, local mass affluent, and high-net-worth clients. In early 2017, it was announced that deVere would launch its own private bank. In addition, deVere also confirmed it has received its own investment banking license.
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