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Allianz Global Investors (AllianzGI) advised investors to look beyond traditional approaches to diversification to navigate the future year, as inflationary pressures bring the global rate-cutting cycle to an end and geopolitical and energy risks add further complexity to the investment environment.
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In Asia, Christian Schulz, AllianzGI chief economist, expects to see accelerated fiscal stimulus and project spending in mainland China to boost the currently weak Chinese economy within the fourth quarter this year.
He anticipates the Federal Reserve to raise interest rates this December, next March and next June, as the US economy to continues to be supported by AI spending, fiscal easing, and resilient consumer spending.
"Growth remains supported by different drivers across regions, from Al and consumer spending in the US to fiscal measures in Europe and increased fiscal stimulus and project spending in China.
AllianzGI Equities chief investment officer Michael Heldmann noted that elevated valuations and bond yields indicate that returns will increasingly need to come from earnings growth and dividends, making stock selection increasingly important, as overall returns trend moderate and and individual stock performance diverges.
Bonds can provide predictable income
Jenny Zeng, Fixed Income chief investment officer shared that fixed income deserves consideration at higher yield levels. "Bonds can provide predictable income, diversification and greater portfolio resilience. With uncertainty rising, active allocation across different parts of the bond market can help investors pursue income across a range of growth and inflation scenarios," she said.
Gregor MA Hirt, Multi Asset chief investment officer, remains constructive on equities and commodities investment, stating that large fiscal deficits remain supportive of gold despite headwinds from higher real yields and a stronger US dollar.
The market has seen concerns regarding the development of AI in the US as democrats performed strongly in midterm election. In response, Heldmann stated that he does not expect data centre construction to be significantly affected in the long term.
