Portfolio manager, Marc Pinto, shares his views on what may be in store for US equity investors in 2018. As the markets become more driven by stock specifics, he believes a focus on secular growth companies that can thrive in different market conditions has the best potential to reward investors. Marc also discusses several of his favoured investment sectors for the year ahead.
Lessons learned from 2017?
I think there are a couple of lessons from 2017. One is that the equity markets have proven to be very resilient, and that equities continue to be an attractive investment class in the low interest rate environment that we currently are in. Equities have benefited from an improving economy, and although valuations are higher than they were at the beginning of the year, given the run-up in the markets, valuations are still reasonable and equities have proven to be the most attractive asset class on a risk-reward basis.
Key themes for your markets in 2018 and portfolio positioning implications?
One of the key themes for 2018 is going to be what is central bank policy going to be around the world. Are we going to continue to see an accommodative rate environment? And if we do see an increase in interest rates, will it be gradual and on the basis of an improving economy which, in my view, would be a very bullish outcome?
Another theme that we’re clearly watching is the gradual improvement in the global economy. In the US here, we’re seeing definite improvement in terms of GDP growth and job numbers, and we’re clearly going to be watching what’s going on in the rest of the world in terms of economic growth.
Key risks and opportunities for 2018?
This has become a market that is very stock-specific, and so we see opportunities in a lot of different sectors. No one sector has proven to be more compelling than the others. As growth investors, we’re looking for companies that see secular growth opportunities, and companies that can grow in a variety of economic environments, so our focus remains on those. In the event that we do see a softening in the global economy, companies that we’re invested in will continue to see good economic growth.
The lower interest rate environment is also very beneficial to growth companies, as an asset class within equities, and assuming that we continue to see a benign interest rate and inflationary environment, those companies should continue to do well. In terms of sectors, you know, we see opportunities in healthcare, in financial services and certain areas within technology. In technology, we’re looking for companies that are more disrupting than are being disrupted. And I would say, you know, within consumer, clearly it’s been a tricky category, given the challenges that retail is facing, but we still see a lot of interesting opportunities in the consumer discretionary space, if not retail.
These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.
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