Best Key investment themes for 2011

Key investment themes for 2011 ; Yogi Dewan, chief executive of Hassium Asset Management, on the outlook for 2011: The economic environment is improving but very slowly. From a market perspective 2010 has ended pretty much as it started. Markets still seem very unsure and are trading on uncertainty and day to day news flow rather than longer term fundamentals. As we approach 2011 we remain cautious but not pessimistic.

1. Equities
Earnings numbers have improved, both top line and guidance. Equity valuations look reasonable. We would look to slowly increase our long exposure. Our preferred regions remain US, Germany and selective emerging markets. In Japan recent stimulus plans and FX intervention has led to an improving environment, though Japan’s recovery is still heavily linked to China.

We are positive broad emerging markets but are mindful of a potential short term correction in China on the back of inflation and asset price bubbles. From a sector perspective we prefer large cap dividend, large cap growth, along with food and beverages. We are negative financials, construction and real-estate, and emerging markets short term on the back of valuation.

2. Bonds
I think bonds look over valued with the onset of QE2. In 2011 we do not anticipate any rate hikes in the developed markets. We do anticipate further sovereign debt downgrades in Europe. We maintain that investor concern and low interest rates will keep bond yields low throughout 2011. Bonds still remain a hedge against downside risk and still offer carry over cash. We prefer short dated investment grade corporate bonds verses sovereign debt and high yield.

3. Currencies
The euro remains over valued despite recent events in Ireland and Greece. We continue to assert that the USD will strengthen longer term against all major currencies but expect short term volatility against the Euro on the back of ongoing sovereign debt concerns. In emerging markets we anticipate continued inflows and ongoing currency appreciation and intervention. Short term we expect gold, the Yen and the Swiss Franc to remain significantly overvalued.

4. Commodities
We remain broadly positive long term on the back of emerging market growth and an undervalued USD. Gold remains in bubble territory; we prefer silver and platinum. Oil will likely remain range bound. We are positive agricultural commodities and base metals.

5. Alternative investments
Hedge funds have broadly underperformed with many managers reluctant to increase net long exposure or utilise leverage. Hedge funds remain expensive and illiquid and would be best avoided in 2011. Structured products remain overly complicated and wholly unsuitable for most investors.

6. Real-estate
We expect further price declines and increasing foreclosures. The US, Spain and Ireland continue to be beset with problems. With limited bank credit, high unemployment, and poor liquidity we anticipate the housing market getting worse before getting better.

Conclusion:
Investors should keep things simple and focus primarily on getting two key strategic investment decisions right; your equity exposure relative to cash and bonds, and your USD exposure relative to your base currency. These two decisions will likely dictate about 80 per cent of 2011 performance. Investors should avoid trading around short term news flow, be mindful of excessive bank charges, and remember that 2011 will be all about preserving your wealth. For the latest updates PRESS CTR + D or visit Stock Market news Today

Related Post: