The super bearish case for global equity markets would be the further acceleration of ongoing trade wars – and it seems to Amit Lodha, a portfolio manager of the Fidelity Global Equities Fund, that trade and defence are two sides of the same coin.
“Trade uncertainty lasting for longer could become a drag for investment, and would be very negative for investors,” Mr Lodha said.
“But I also believe that this would force Chinese authorities to push even more aggressively towards a stimulus scenario to counter the effects of a slowdown in its economy.”
The portfolio manager believes the bullish case for global markets involves oil prices coming down and the US Federal Reserve suggesting that it would take a pause and watch data due to uncertainty from trade-related disputes.
“With rising raw material costs and wage pressures, the Fed needs to start cutting rates or suggest that it is done. This would be an extremely Goldilocks-positive scenario (good for growth stocks and bad for value stocks). It could also be the time to buy defensives,” Mr Lodha said.
“US and Japan continue to provide interesting bottom-up investment opportunities. The US growth outlook remains strong, due to robust macroeconomic data, tax cuts and fiscal spending stimulus, while overseas cash repatriation is encouraging buyback activity.
“At a sector level, the focus is on information technology stocks – less on FANGS and more on old tech names like ORACLE and Microsoft, which have solid business fundamentals. I have a more positive view on the direction of oil prices, and continue to invest in long-term ideas in the healthcare space.
“Overall, I believe that stock-specific fundamentals will remain the key driver of equity returns. Consequently, the portfolio continues to focus on companies that demonstrate strong pricing power, are led by talented management teams and are available at reasonable valuations.”
