2Q19 Outlook: Lift to Win


DBS CIO Hou Wey Fook shares how the barbell strategy outperforms in volatile times
Chief Investment Office26 Mar 2019
Photo credit: AFP Photo


Despite 2018 marking the longest US bull market in history, we argued that last December’s equity fallout was not the start of a bear market. Instead, we predicted a “tug of war” between the bulls and the bears would ensue, translating into a volatile, wide-ranging market.

This roadmap panned out very nicely as we saw a sharp V-shaped recovery in 1Q19. This was set in motion by the Federal Reserve’s U-turn in policy, from a hawkish to dovish stance. Positive vibes from US President Donald Trump relating to the trade war, as well as China’s policy stimulus, aided the rebound.

So, are we now at the cusp of a renewed bull market? Until we see a comprehensive US-China trade deal, including the lifting of existing tariffs, we do not see equity indices breaking out to new highs. At this juncture, we hold on to our view that this “tug of war” market will remain in play.

We call for portfolios to employ a barbell strategy, in which overweight exposures are taken at both ends of the risk spectrum. To validate that the barbell strategy outperforms, we have gone back to past periods of heightened volatility and analysed how the barbell strategy stood the test of time. You can find this analysis in the Asset Allocation section.

On the back of a now dovish Fed, we believe the recent outperformance of Asia and Emerging Markets is in the early innings. The China A-share market presents a unique opportunity, and so do Singapore REITs – an anchor investment in a barbell portfolio. We have also raised the weighting on gold to increase portfolio resilience.

Lastly, for our thematic plays, we continue to seek winners in the Millennial trend. In the last quarter we talked about athleisure; now we explore the gastronomy wave that is in vogue.

Do enjoy the read!

Hou Wey Fook, CFA

Chief Investment Officer


Click here to read the full 2Q19 Outlook report.


GENERAL DISCLOSURE/DISCLAIMER 

This information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only.  This publication is intended for DBS Bank and its subsidiaries or affiliates (collectively “DBS”) and clients to whom it has been delivered and may not be reproduced, transmitted or communicated to any other person without the prior written permission of DBS Bank. 

This publication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to you to subscribe to or to enter into any transaction as described, nor is it calculated to invite or permit the making of offers to the public to subscribe to or enter into any transaction for cash or other consideration and should not be viewed as such.

The information herein may be incomplete or condensed and it may not include a number of terms and provisions nor does it identify or define all or any of the risks associated to any actual transaction. Any terms, conditions and opinions contained herein may have been obtained from various sources and neither DBS nor any of their respective directors or employees (collectively the “DBS Group”) make any warranty, expressed or implied, as to its accuracy or completeness and thus assume no responsibility of it. The information herein may be subject to further revision, verification and updating and DBS Group undertakes no responsibility thereof.

All figures and amounts stated are for illustration purposes only and shall not bind DBS Group. This publication does not have regard to the specific investment objectives, financial situation or particular needs of any specific person. Before entering into any transaction to purchase any product mentioned in this publication, you should take steps to ensure that you understand the transaction and has made an independent assessment of the appropriateness of the transaction in light of your own objectives and circumstances. In particular, you should read all the relevant documentation pertaining to the product and may wish to seek advice from a financial or other professional adviser or make such independent investigations as you consider necessary or appropriate for such purposes. If you choose not to do so, you should consider carefully whether any product mentioned in this publication is suitable for you.  DBS Group does not act as an adviser and assumes no fiduciary responsibility or liability for any consequences, financial or otherwise, arising from any arrangement or entrance into any transaction in reliance on the information contained herein.  In order to build your own independent analysis of any transaction and its consequences, you should consult your own independent financial, accounting, tax, legal or other competent professional advisors as you deem appropriate to ensure that any assessment you make is suitable for you in light of your own financial, accounting, tax, and legal constraints and objectives without relying in any way on DBS Group or any position which DBS Group might have expressed in this document or orally to you in the discussion.

If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of the Information, which may arise as a result of electronic transmission. If verification is required, please request for a hard-copy version.

This publication is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Singapore: This publication is distributed by DBS Bank Ltd (Company Regn. No. 196800306E) ("DBS") which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore (the "MAS").