Henk Potts, one of Barclays Wealth’s leading equity strategists, has told local businesses and investors that it is time to return to a business-as-usual approach to investment decisions.
Henk Potts, said: “It is time to move beyond last year’s trauma. That means, broadly, holding more stocks and fewer bonds than typical and having more exposure to asset classes and sectors that do better in early stages of recovery.”
“There will be both tactical opportunities, due to current market mispricing being righted, and structural opportunities, connected for example with the rise of Asia,” continued Mr Potts. “It is important to remember, however, that each economic cycle is unique; and prices of some typical early sector winners, such as emerging market equities, high yield bonds, or European small cap stocks, already reflect the expectation of a recovery.”
“We see investment opportunities in both the commodity and currency markets. Commodity prices have not risen this year by as much as we normally see towards the end of a recession, so holding a diversified basket of commodities is a good way to position for continued recovery in global demand. We also see value in holding the currencies of countries that did not experience as severe a recession as their peers, and whose currencies stand to benefit as a result.. In particular, countries boosted by commodity-related exports should continue to see their exchange rates appreciate.”
Mr Potts joined Barclays in 1998 and was appointed equity strategist at Barclays Stockbrokers in 2001 where he works as part of a team formulating investment strategy for clients. He is well known in the media world, with regular appearances on Radio 4 and 5, GMTV, ITV, Channel 4, BBC News 24, Bloomberg and Sky News, as well as being both LBC and Talksport’s renowned morning City commentator.
Our Investment Themes:
• Move past the crisis
• Position for this economic recovery
• Seek diverse exposure to Asian economic growth
• We believe short-term interest rates will remain very low for a long time, but longer-term yields will likely start rising sooner
Our Macro view:
• Almost everywhere, economists are upping their growth forecasts for 2010. They are also exhibiting greater confidence in their predictions.
• At the same time, emerging markets have been living up to their description – providing evidence of a quicker and more forthright recovery than their developed counterparts.
• Policymakers are however reticent to show too much enthusiasm, pointing out that a number of headwinds will limit the pace of pickup.
Our investment calls include the following:
• Buy US small-cap stocks. While these tend to perform poorly on a relative basis in a downturn – for a number reasons – the inverse is generally true in an upturn, with small caps outperforming [the market]. Recently, European small caps have risen quickly, but US small caps have not.
We believe this likely offers an opportunity.
• Buy a diversified portfolio of commodities. After the unusually sharp fall of commodity prices during this recession, we expect a rebound. Rapidly growing Asian economies, which tend to be relatively heavy commodity consumers, are also expected to help exert upwards pressure on commodity prices.
• Invest in inverse-floating-rate and capped-floating-rate notes. We think that monetary policy will be tightened in the major economies much more slowly than current market prices imply. These two types of notes offer an opportunity to benefit from this anomaly.
• Buy “first-to-tighten” currencies, specifically the Norwegian krone and Australian dollar. Although monetary policy is expected to tighten slowly in the major economies, interest rates could go up soon in Norway and Australia and perhaps by more than the markets expect. We are recommending that investors take positions that are long these currencies and short the US dollar, the euro, the yen or a combination of the three.
Issued by Lisa Gutcher, Image PR on 734444 or email firstname.lastname@example.org
Notes to editors:
Arnaud Humblot, Barclays Wealth, Corporate Communications
020 7699 2756 / email@example.com
Jignasa Patel, Barclays Wealth, Corporate Communications
020 7699 2483 / Jignasa.firstname.lastname@example.org
About Barclays Wealth
Barclays Wealth is a leading global wealth manager, and the UK’s largest, with total client assets of £134bn, as at 30 June 2009. With offices in 25 countries, Barclays Wealth serves affluent, high net worth and intermediary clients worldwide, providing international and private banking, investment management, fiduciary services, and brokerage.
Barclays Group is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services with an extensive international presence in Europe, the Americas, Africa and Asia.
With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 145,000 people. Barclays moves, lends, invests and protects money for over 49 million customers and clients worldwide.
For further information about Barclays Wealth, please visit our website www.barclayswealth.com.
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