4Q19 Outlook: Ride the Wave


DBS CIO Hou Wey Fook shares how to generate positive returns in a world of zero to negative yields
Chief Investment Office27 Sep 2019
Photo credit: AFP Photo


Welcome to the final quarter of 2019. In 3Q19’s CIO Insights, we said the world was changing, therefore the approach to investing would be to ride the wave of this changing world.

In recent months, we saw the resumption of policy easing by global central banks. The European Central Bank cut its deposit rate from -0.4% to a new record low of -0.5%, and the Federal Reserve cut rates for the second time this year. The ultra-easy monetary policy environment we are in has resulted in the amount of negative-yielding bonds hitting an unprecedented level of 25% of the world’s bond market capitalisation.

As a result of near-zero to negative cash and bond yields today, the pertinent question to ask is – where will the pool of global savings head to, in order to generate a positive return?

We argue that institutional funds – the likes of sovereign wealth, pension, insurance, and endowment portfolios – have little choice but to turn to equities. Barring a full-blown trade war, this prospective rotation in asset classes is one of the principal reasons why we stay constructive on equities.

We continue to advocate a Barbell Strategy for your portfolio. This involves building Overweight positions in two areas. First, income-generating assets and second, equities that ride on secular growth trends of a changing world. On income assets, add dividend-yielding equities which will become the new “bond proxies”. On growth assets, stay invested in winners of the ageing, digitalisation, and sustainability trends.

In this issue, we show why gold must have a place in your portfolio, and we introduce Europe oil majors and Europe banks’ AT1s as attractive dividend plays. We also include a feature on Vietnam, Asia’s rising star.

Do enjoy the read!



Hou Wey Fook, CFA

Chief Investment Officer



Click here to read the full 4Q19 Outlook report.


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