Where to put your money for the next few months?

In these difficult times it is hard to know where your money will be safe and earn the returns needed to grow your savings. Gulf News asked investment managers and analysts where they will be putting their money in the coming months

EQUITIES:

Trevor Greetham, head of Tactical Asset Allocation, Fidelity:

“[We prefer] US equities to that of continental Europe. The US has a better policy backdrop and a healthier financial system. Europe’s crisis is in remission not retreat. We also prefer UK equities over those in Japan.

“The euro crisis will continue to be an issue for the foreseeable future and economic data is weak, but central banks have started to ease [monetary] policy and stocks have responded positively. [Markets are now moving in both directions based on short-term policy cycles.] It may take a new sell off in stocks and a drop in inflation expectations to shock policy makers into the full-hearted quantitative (economic stimulus) response we think will be needed to underpin the next recovery.”

Clem Chambers, CEO of ADVFN, a financial markets website:

“Equities have been doing very well while the world economy has been struggling so it is extremely hard to call the next six months. The stock market is known to look ahead to conditions 12 to 18 months in the future to price companies, so the current rally is predicting better conditions for 2013 and 2014.

“The optimism currently seen in equities is a reflection of the US recovery, which, however slow and painful is nonetheless underway. The probability China will bounce back in 2013 is another factor. There is also a possibility Europe will be on the mend by then. An easing of the Euro-crisis during the holidays has helped Euro markets but continued strength will be fragile as political horse trading could easily put it back into a spin. Nonetheless, a US rally should alleviate any correction.

“There is also the theory that the market is bullish in the year of a successful US presidential re-election. The further Obama gets ahead in the Presidential polls, the stronger the markets will be.

“Emerging markets are suffering from China’s clamp down on money supply and they will remain fragile until China lets money back into its system. This easing could well happen before Christmas which would start a strong rally in the BRICs (Brazil, Russia, India, China) An aggressive investor should be putting a large chunk of their money (60 per cent) into European and US equities, with, 30% in US, 15% in UK, 10% in French and 5% in Italian/Spanish/Greek blue chips.”

Dan Dowding, senior executive officer, Killik & Co Middle East and Asia:

“It is almost impossible to predict expected returns from each individual asset class over as short a time as six months. However we continue to build balanced portfolios with a bias towards income. We have a slight bias to US, although the higher dividend payers are in the UK marker – pharmas, utilities, telcos are those we like for yield.

Dividends have to be sustainable, well covered and growing by inflation plus. Not chasing yield from financials.”

Anil Rego, CEO of Right Horizons:

“The US equity markets having done well. In the event of continued global uncertainty, US markets could outperform for a few more months, however if global risk appetite goes up, emerging markets including India could outperform.

Our asset allocation for a medium risk investor (not so aggressive and not so conservative) is 40 per cent in equities. We focus on mutual funds, but in the case of individual companies, we prefer blue chips and dividend yield stocks.”

BONDS: GOVERNMENT AND COPORATE

Clem Chambers, ADVFN, a financial markets website:

“US short term bonds are at long-term, historic highs. This makes them dangerously oversubscribed. The US appears to be cautious about unleashing a third round of (economic stimulus) or quantitative easing, so at some stage yields will rise and bonds fall. At the moment, Treasuries are a haven, so for now nothing much will happen, but when it does it will be dramatic.

“European bonds are a mixed bag; havens like Germany and, to a lesser extent the UK and France are enjoying low yields and high prices, while countries in the “sin bin” such as Italy and Spain have high yields and low prices. As a country can go from haven to sinner in weeks, Eurobonds are a dangerous game. In the short term, the dynamic of haven bonds at zero percent interest versus pariah bonds at 6% will continue. We [have invested in] global government bonds”

Dan Dowding, Killik & Co Middle East and Asia:

“We continue to own short dated corporate debt, issued by high quality cash generative businesses. While government bonds yields could go lower, providing capital some further upside, this is likely to be limited and there is potential for lots of downside. So, we are relatively underweight government debt.”

Trevor Greetham, Fidelity:

“We remain overweight global government bonds.”

Anil Rego, Right Horizons:

“Our allocation to bonds for a medium risk investor is 15%. Debt returns in India are superior and hence investing into US and European debt may not be a good idea. [We look at] Indian bonds with good credit quality, mainly PSUs or AAA companies. We have 5 per cent allocation for short term liquid debt funds.”

GOLD, PROPERTY, COMMODITIES AND ALTERNATIVE INVESTMENTS

Clem Chambers, ADVFN, a financial markets website:

“Alternative investments, including commodities, continue to outperform and will keep on breaking new records. The slump in China has dulled demand and so has a retrenchment in Russia, however there is still strong global demand for hard assets and this will continue to drive up prices of alternative investments.

“The glory days of private equity are over. In a credit strapped world, only the big players are making much of an impact. Like any boom that busted, private equity will never recover its former status, but this is probably good news for the remaining companies able to be active in the new climate.”

Trevor Greetham, Fidelity:

“Like equity, commodity markets have [given] mixed signals and confidence remains fragile. We have added to commodity positions, though we are still very underweight. We have a diversified exposure in commodities but we have a bias to gold. We also increased our overweight positions in property securities, such as Real Estate Investment Trusts (REITs).”

Dan Dowding, Killik & Co Middle East and Asia:

“We have a small weighting in private equity as listed vehicles are trading at significant discounts. This is unlikely to narrow in the near future, therefore own it with a long term view. We own selected commodities, although have reduced exposure over the last year, as China is showing signs of slowing and therefore becoming a price giver as opposed to price taker. We continue to hold gold as a hedge for when inflation rears its ugly head, as politicians try to print us out of trouble.”

Anil Rego, Right Horizons:

“Real Estate is to be considered with a three to five year perspective. Look for options that deliver higher capital appreciation or high rental yields. We have about 30 percent of our holdings in alternative assets and real estate.”

Pradeep Unni, senior analyst, Richcomm Global

“Gold has been holding steady and trading around the $1600 range on the back of a economic stimulus hopes from either part of the Atlantic (US and EU) . However these hopes are being tarnished now as US continuously produces better than expected data from multiple economic fronts. This will probably not help gold’s cause.

“However there are more than one compelling reasons to believe that gold would potentially see accelerated gains in the coming months. Gold may see the momentum from the expectation of a break-up of the Eurozone which will boost its allure as a safe haven. Investors are slowly and steadily accumulating gold reserves in physical form and through derivatives. Over the last 30 years (and especially over the last 10) gold has always surged by over five to ten per cent during the late 3rd quarter and in the 4th quarter. This suggests that this is a seasonally ideal time to invest in gold.

“Demand from India has dropped a lot, mainly because of the high inflation, a weak rupee and more importantly the confusion with respect to the import duty. However this drop in demand will catch up in the coming months.

“Buy gold at all dips for a possible spike in the near term. Price volatility is here to stay as every day brings new surprises from the European Union. It’s quoted around $1610/oz now, we expect it to gradually spike up to over $1680. Year-end targets are for $1800+/ oz. Downside price supports are around $1600-$1580/ oz