1Q20 Outlook: New wine, new skin


DBS CIO Hou Wey Fook shares new ideas on how to position portfolios for this changing world
Chief Investment Office12 Dec 2019
Photo credit: AFP Photo


Last year, global equities gained 23%, despite being confronted with recession fears from the global trade war.

We also saw the 11th year of the US bull market, the longest on record. This has been the “most unloved” bull as persistent investor scepticism has led to portfolios staying under-invested. Should the market stay resilient, portfolios that are sitting on excess cash levels may have little choice but to get back in.

This brings the “fear of missing out”, or FOMO in short, into play. At the same time, given ultra-low rates and bond yields today, “there is no alternative” – TINA in short – to equities as an asset class.

Barring a full-blown trade war – which is not our base-case scenario – both FOMO and TINA will support equities.

But we must also be cognisant the world is changing. In ancient times, new wine would never be stored in old wineskins as fermentation would burst the skin. Therefore, we need to implement a new strategy today to capture the opportunities brought about by this changing world.

How then should investors position their portfolios in 2020?

We continue to advocate the Barbell strategy that overweights income-generating assets, as well as equities that are beneficiaries of a digital economy, an ageing population, and a growing China middle class.

This strategy has served us well. In 2019, Singapore REITs rallied 22% while US Technology registered a whopping 45% return.

In 1Q20’s CIO Insights, we also introduce new themes – e-Sports and Semiconductors – that fit well in the Barbell portfolio.

Do enjoy the read, and let us toast to a fruitful year of investing in 2020!

 

Hou Wey Fook

Chief Investment Officer

 

Click here to read the full 1Q20 report.


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