“We are reasonably optimistic overall and still constructive on equities,” said senior investment manager Andrew Cole. “The dollar has stopped rising which is good for corporate earnings around the world. We believe a move to cyclicals is warranted though, with the bond proxies no longer working for investors.”
Cole said that within equities, the firm has targeted a few areas in particular. “We bought into the UK housebuilders after the Brexit vote,” he said. “The valuations got very low and if there is one industry that the government can directly support in the event of a recession it is construction.”
Pictet has also topped up its emerging markets exposure through adding mining stocks, and Cole said he likes technology as a sector at the moment.
As we move into the Autumn Cole said his main focus will be on Janet Yellen and the Federal Reserve, rather than Donald Trump and Hillary Clinton.
“We do not see the US election as a major issue for investors,” he said. “The timing of the rate rise is key, and the end of this year looks the likeliest time.”
Heading into 2017, something Cole believes will be important for investors to keep an eye on is signs the European Central Bank is going to turn off the QE taps.
“I believe the market is complacent over ECB support and is acting as if it will go on forever,” he said. “We are not repositioning for the end of ECB QE yet, but it is something that is on our radar now.”