Page 19 - Newcom

INVESTMENT EXECUTIVE
BYB: OUTLOOK 2020
January 2020
19
Positioning
portfolios for
a slowdown
Should clients stay the course,
exit the market or review their asset mix?
l BY DWARKA LAKHAN
investors are in for a challen-
ging year as they try to balance the risk of escalating global uncertainty with the prospect of capitalizing on potentially strong growth in equities markets.
Portfolio managers interviewed by Investment Executive for this story do not plan to make significant changes to their clients’ portfolios. They’re either stay- ing the course while focusing on clients’ long-term goals or taking a more defensive stance to counter the effects of a potential decline in the mar-
kets. With only minor portfolio tweaks, the portfolio managers’ stances will remain the same regardless of how close clients are to retirement.
The 2020 forecast includes: a global economic slow- down; the potential
for a recession; ongoing trade tensions, especially between the U.S. and China; unresolved concerns over Brexit; grow- ing geopolitical tensions, particularly in the Middle East and, to a lesser extent, in Asia; and the U.S. presidential election in November. (See story on page 14.)
Each of those predictions will contrib- ute to uncertainty in the markets.
With these uncertainties in mind, should clients stay the course, or exit the market and wait until greater certainty returns?
Or should you tweak your clients’ asset mix with a focus on quality to minimize poten- tial losses in a market downturn?
Steven Belchetz, senior vice president, business development and client relation- ships, with T.E. Wealth in Toronto, says a recession in North America is on the hori- zon, and suggests that “it would happen in the next 12 to 18 months.”
Ian Riach, senior vice president, multi- asset solutions, and portfolio manager with Franklin Templeton Investments Corp. in Toronto, also believes we are heading into recession, but doesn’t know when. “The U.S. has a lot of vulnerabilities,” he says, citing the U.S. budget deficit in particular, which hit a seven-year high on Sept. 30, 2019.
Trade tensions, on the other hand, have resulted in declining industrial and manufacturing activity and deteriorating global trade conditions, thereby exacer- bating concerns of a recession and a slow- down in global growth.
“We are currently taking a slightly risk- off stance and are being cautious,” Riach says. He attributes this stance to deceler- ating economic and corporate data, slightly extended valuation levels and the need for “higher growth to justify current valuations.”
Belchetz, however, is “not worried about short-term swings in the market”
> TURN TO CYCLICAL / PAGE 20
Rising populism and concerns over Brexit and trade, concerns that have been around for a long time, may already be priced in
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