The coming year in equity markets is likely to be one in which the bulk of returns come from income, according to the guests on the latest FTAdviser podcast.
Stephen Anness, head of global equities at Invesco and manager of the Invesco Select Trust global income portfolio, said one lesson learned from the market conditions of 2022 is that valuation matters again.
He said: "There was a period where factor type investing, such as growth investing, worked very well. But last year was a period where valuation mattered again.
"Last year was a period when we saw that macro matters, and given how volatile the macro environment is right now, it is wise to have a balance of different types of equities in a portfolio and to pay attention to earnings.”
Anness was joined on the podcast by Wayne Berry, senior investment manager at RBC Brewin Dolphin, who said that while equities fell last year, earnings estimates remain unchanged.
"As those come though this year it will determine a lot around returns, but I certainly expect that income to be a part of those returns," Berry said.
The extent to which the market turbulence of 2022 was driven by investors being willing to pay less for equities was highlighted by the third guest on the podcast, Alex Illingworth, a global equity investor at Artemis.
He said: “Although the S&P fell by 22 per cent last year, actual company earnings rose by 3 per cent.
"The lesson there is that investors will care about dividends this year, and if a company is high growth but not paying a dividend, they will want to know that the growth is profitable growth.”
david.thorpe@ft.com
