Yves Bonzon, Chief Investment Officer at Julius Baer
Doha, Qatar: The equity and fixed income markets offer several opportunities as the opportunity today in the market is better than it has been in probably half a generation, a top official has said.
In an exclusive interview with The Peninsula, Yves Bonzon, Chief Investment Officer at Julius Baer, during his visit to Qatar shared insights on key trends and investment outlook for global economy.
Speaking about key investments to be considered in the portfolio amid a high interest rate environment and does fixed-rate savings bonds, FTSE 100 ultra high-yield dividend stocks and contrarian bets could provide opportunities, Bonzon noted that there are many opportunities.
“We lived an extended period of financial repression. Bonds were on purpose, priced by policymaker for confiscation, and we expected actually this bond bubble to deflate in a very gradual, very orderly manner over the course of a decade or slightly more. What we thought would take 10 years has happened actually in two years. Interest rates today are fully normalised. We actually think in the short term they’ve slightly overshot and therefore this opens a wealth of opportunities not only in equity markets but as well in fixed income markets,” he said.
The official added, “We all wish we could time the market perfectly, and that applies equally to stocks and to bonds but that’s not the way capital market works. We believe rates have actually slightly exceeded equilibrium today and they might stay elevated for a while, but they should eventually normalise. We see no evidence of a recession in the United States in the next six months or so. So we think this is a time when one needs to invest.”
There are opportunities to buy cheap hedges in a multi asset portfolio context by buying very cheap long duration treasury bonds. You don’t need to allocate much capital to create the hedge in your portfolio and then high yield 9% and above and even quality high yield in the high 8% emerging corporate bonds which will have very fairer technicals going forward with more redemption and insurance.
All of these are great fixed income opportunities and these yields are actually close to equity return with a fraction of the
risk.
Highlighting the key trends, investment approach by explaining the sectoral/thematic investment outlook and what is in store for the global economy in 2024, Bonzon said, “When you look at sectors there are not many very provocative outliers. In markets, sometimes valuations are extremely provocative - cheap or expensive and you don’t need to make forecasts about the future asthe valuation is so expensive or cheap the market tells you what to do. We don’t have that set of circumstances today, maybe with one exception, healthcare.”
“You have some stocks that trade an extremely depressed valuation on key relevant metrics. That’s certainly one outlier in banks. We think back to fixed income there are still opportunities in the contingent convertible subordinated bank bonds market. So in banks it’s a close call between equity and subordinated bonds,” Chief Investment Officer at Julius Baer added.
