Equities represent the best value against a background of financial uncertainty, according to Psigma Investment Management, a London-based firm, which expects to increase its exposure to this asset class.
Although there are “tentative signs that the global economy is spluttering”, chief investment officer Thomas Becket said he does not anticipate the kind of financial collapse that would damage stock market valuations.
“We believe that the economy is undergoing a mid-cycle slowdown similar to that experienced last summer - which created a similar funk across asset markets - rather than anything more macabre,” he said.
This means investors will lose out if they take a too-cautious approach and sell off risky assets, especially as safe alternatives such as cash and government bonds are offering low yields and inflation threatens to wipe out returns on those bonds that are not index-linked. Corporate bonds may represent a promising investment, but only if yields are high enough to outpace inflation.
“The important fact for equities and corporate credit remains that we expect resilient profits growth in the quarters ahead, despite the economic slowdown,” said Becket.
©2011 funds europe