Investec takes defensive position

Business | Avery Chen 23 Jul 2019

Investec Asset Management expects the world's longest economic expansion since World War II will extend to at least next year but is taking a more defensive approach to delivering a more consistent return amid a late economic cycle, said John Stopford, head of multi-asset income.

The economic cycle may not near its end, given that global central banks are looking to cut interest rates and extend the cycle and Investec reckons there still are some potential growth in the market, he said.

Within growth assets, Investec thinks equities look more attractive, while corporate bonds are pretty fully priced, Stopford said.

He said the company is not relying too heavily on government bonds, as investors have begun to price in for a reasonable probability of recession.

The company prefers the yen to provide a good defense, as it is cheap because Japan has been running a very loose policy for a long time, Stopford said.

Investec also owns options in equity hedging to provide protection.

He also warns that there is room for disappointment in the decision over the United States Federal Reserve's interest rates at the end of July, adding that there's a big argument for cutting rates aggressively.

"What I think in the short term, that's a definite risk", he said, given that there was a lot of speculation in the market that pricing in 50 basis points rate cuts next week, and equities have gone up a lot so far this year.

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