Investors should be looking for opportunities in cyclical shares, while lightening their exposure to...
Investors should be looking for opportunities in cyclical shares, while lightening their exposure to defensive assets and bonds, according to Michael Kariaganis, head of strategy at Aberdeen.
Speaking at the Investment Week Forum in London, he said that while 2002 would not be a spectacular year for stock markets, investors would still be able to find value in the current economic environment.
After the collapse of the technology boom in 2001, many investors who suffered heavy losses became highly defensive, leading to an explosion in cash and bond investments. But this trend is running to the end of its course, according to Kariaganis. As such, he suggested that investors should be considering adjusting their investment portfolios towards growth.
He claimed that the current bear market ranks as the worst stock market environment since 1973 and 1974, and the ninth worst in the past 100 years.
However, he suggested that the global recovery now rests on the US and he claimed that the economic momentum in that region will be stronger by the end of 2002, compared to the end of last year.
'We believe there are signs of improvement in the US economy,' he said. 'There is a sense that the economy is bouncing back a little quickly than people thought two or three months ago after 11 September.'
Kariaganis said this is due to the intense response of the monetary authorities in the US ' and globally ' to the economic slowdown.
'Investment markets are entering the traditional sweet spot of the investment cycle when a combination of low interest rates, strong liquidity, and gradually improving growth expectations supports a recovery in higher risk asset classes,' he said.
However, he added there is a risk that the US economy will double-dip back into recession. But if this were to happen, it would not be because of some inherent flaw in the US economy, but because of a shock factor, such as an oil price shock, he claimed.
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