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Where to find equity ideas in an over-stretched market

Where to find equity ideas in an over-stretched market

In recent months investors have expressed their strong preference for European equities.

Dutch investors threw their weight behind the sector, with 50% of fund selectors at Citywire Amsterdam 2017, while at Citywire Switzerland 2017, selectors said they would pile into European equities over the next six months.

In this latest instalment of Selector Snapshot, one Luxembourg-based  investment professional reveals where he is positioned in the market.

Selector: Thierry Carabin

Company: ING Luxembourg

Markets are quite high now, both in the bond and equity markets. In bonds, there could be opportunities in US dollar-denominated bonds, but we actually favour emerging market debt both in hard and local currency.

For equities, we actually prefer eurozone and emerging market equities. We invest in all traditional areas of the market, while, at the moment, we are underweight bonds in favour of cash and equity.

In bonds, we are overweight EMD hard currency and local currency and underweight govvies and credits, both in investment grade and high yield. Rates should hike, maybe slower than previously anticipated and spreads are close to their lowest levels.

In equities we are overweight the eurozone and EMs. We like eurozone equities because growth in the eurozone is gaining momentum and we are also seeing improving margins and return on equity for companies.

Even if this is only on a short-term basis, as the euro and US dollar is not favourable for European companies.

EM equities are cheap and have good earnings momentum, while we are currently neutral on Japan and slightly underweight in the US, as it’s expensive and there are problems and issues with the Trump administration.

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