WealthDFM | March 2021
BARCLAYS PRIVATE BANK
The state of markets and why
we shouldn’t fear corrections
Wealth DFM’s Sue Whitbread talks to Gerald Moser, Chief Market Strategist at Barclays Private Bank, about why he believes corrections are healthy and investing in quality businesses lies at the heart of a sound investment strategy.
SW: When it comes to investment, many portfolio managers stick with the traditional 60/40 investment strategy – where 60% is typically invested in higher risk/higher reward areas and 40% in lower risk assets? What’s your view on this? GM: For many investors, I think that diversifying away from the typical 60/40 strategy makes sense at the moment. For those who do follow it, based on historical evidence, I can see why they do it. Over the past twenty years, the performance has been really strong. Equity markets have performed well and we’ve seen one of the strongest rallies ever in bond markets as interest rates have fallen to such low levels. We’ve still seen interesting yield addition to a portfolio too. Historically, the 60/40 strategy has been a powerful tool in investing and diversifying. We are now reaching a point where we struggle to see where capital appreciation might come from within government bonds – with global base rates at or close to zero. Yields too are low. Even at current
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levels, you’re not compensated for inflation so you’re losing money. Looking ahead, it’s difficult to see what the next five years will bring in terms of diversification and income within a portfolio from the sector. But there are other interesting opportunities – mostly in the alternatives space – including private markets, hedge funds or gold. SW: Let’s move on to talk more about the investment outlook. Are you bullish about things or do you suspect a bit of a correction might be coming down the line in the next couple of months? If so, what do you see as the drivers behind that? GM: It does rather depend on the timescale you look at. Returns are likely to be lower over the next five years. This is a result of the high valuations we are seeing across almost every asset class – equity, fixed income etc. Therefore, expectations should be lower, in terms of where we are now. That doesn’t mean that there aren’t opportunities though. Even where index levels are high,
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