Asset Allocation

The dividend yield is often the first thing a manager of a dividend fund looks at when analysing a stock. But not Ludwig Palm, manager of Flossbach von Storch – Dividend  fund. His main focus is whether a company is able to increase its dividend in the long term.

Low interest rates, moderate inflation and a strong recovery in corporate profits. For the time being, the environment for equities remains extremely favourable, according to James Ashley, Head of International Market Strategy at Goldman Sachs Asset Management (GSAM).

Investors should focus on cyclical equities, which benefit from a strong economic recovery. At the same time, they should use options and own some gold and Treasuries to protect their portfolio, according to Andrew Harmstone, head of Global Balanced Risk Control Strategy at Morgan Stanley.

The impending economic recovery may well mean the big tech stocks will cede their market leadership for the time being. But the FAMAG stocks remain attractive on a long-term basis, says Julian Cook, portfolio specialist for US equities at T. Rowe Price. Apart from one though.

A car with two accelerators and no brakes. This is how Philippe Gijsels (pictured right), chief strategist at BNP Paribas Fortis, describes current monetary and fiscal policies. Consequently, he expects 2021 will be a good year for risky assets.

The US Bloomberg Barclays High Yield Index has already risen by more than 30% since its low in March. But the big rally is now over, with the remaining opportunities now primarily in reopening trades and rising stars, according to Walter Kilcullen, manager of the Legg Mason Western Asset US High Yield Fund.

The world economy is set for strong growth next year, helped by a broad roll-out of the coronavirus vaccine which will restore confidence. But there is a downside to this development: it will be followed by a strong rise in inflation – of up to 5%.

Simon Ward (pictured), Janus Henderson’s chief economist, gives this forecast to clients in his macroeconomic outlook. He expects a long-term period of substantially higher inflation from 2021 onwards.

The expected returns on US value stocks are attractive compared to growth stocks. As a coronavirus vaccine is now around the corner, the global economy will pick up next year. This will be supportive for long-term outperformance of value stocks, according tot Christian Correa, President and Chief Investment Officer of Franklin Mutual Series.

Many people will continue to work partly from home until after the pandemic is over. This reduces demand for office space. At the same time, however, the function of offices is changing. This means office space will continue to be in demand, and mainly at prime locations, says Richard Gwilliam, head of property research at M&G Real Estate.

The price of an average house in Luxembourg has now risen well above €1m, making the Grand Duchy Europe’s second-most expensive housing market after Monaco. The regulators have just announced plans to impose tough minimum deposit requirements on new housing loans. Are these signs of speculative exuberance and is there a risk to the banking sector? Should investors be worried?