Whitechurch Securities has tipped equity funds that invest in cyclical companies and those with a bias towards value stocks to outperform in 2014.
The wealth and discretionary manager said, in an outlook for 2014, that we could enter a “goldilocks” period for markets.
This would be when growth is steady enough to benefit stocks but not strong enough to raise fears about inflation and prompt central banks to tighten monetary policy.
Whitechurch has tipped equities to do well in this environment, particularly managers looking to invest in undervalued parts of the market, a strategy which it tipped for developed markets such as the US and the UK. However, the wealth manager said the best value opportunities were in Asia and emerging markets, which have underperformed recently, especially Asia Pacific, where it said there are the “cheapest valuations available in global equity markets and some of the most exciting growth prospects”.
In fixed income, Whitechurch said it preferred to access fixed income through flexible strategic bond fund managers, but preferred those with a focus on higher yielding bonds and inflation-linked bonds in 2014.
The team said higher yield bonds should outperform in a steadily improving economic outlook and they think inflation protection is still necessary, in spite of inflation falling in the developed world recently.