Perpetual stock-picks global equities in outlier markets

As global growth continues to be stagnant Perpetual Investments is looking to outlier markets for stock picking opportunities. 

The global equities investment team believes markets others are avoiding could give long-term capital growth and income, as they seek to increase their investment universe and portfolio flexibility.

“There is increasing demand for global equities as domestic returns look more subdued and we believe it is certainly a stock pickers market in regions such as Europe and Asia, where valuations are more attractive,” Garry Laurence, portfolio manager, global equities at Perpetual said.

Russia, which has felt tightening economic sanctions from the EU and US causing the rouble to tumble, is an area that Laurence said his team had been looking in to, as yields are expected to flatten in the US when the Fed makes an anticipated rate hike later this year.

“We’ve seen a peak in the US. Cost pressures are driving down US margins,” Laurence said.

According to Matt Sherwood, head of investment market research at Perpetual, this is a new era of global secular stagnation.

“This is not cyclical, this is systemic. Thrust in three of the four engines of economic growth is losing power,” Sherwood said.

The four engines referenced are population growth, participation, productivity and price. Each global region is experiencing a decrease in three of these areas, Australasia being the exception with a decrease in two, Sherwood explained.

“Emerging markets are more than 50 per cent developed and returns from industrialisation is diminishing. [Globally] valuation expansion has given years of good returns, but monetary expansion is exhausted. Governments are finally getting the message the fiscal side needs to step up,” he said.

He added that the best strategy in this environment is to increase the flexibility of investment portfolios and the increase the investment universe.

 

 

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