Equity market returns are starting to “broaden out” beyond the large US technology companies, but to take full advantage means investing in areas of the market that until recently appeared to have poor prospects, according to the guests on the latest edition of the FT Adviser podcast.
Fahad Hassan, chief investment officer at Albemarle Street Partners, said: “It is almost a situation now where we have good problems, one of the good problems being there are a lot of areas of the equity market we want to own.
"Lower interest rates are coming and those are usually good for small caps and value stocks, especially as it appears economies are starting to perform better, the UK economy has posted good GDP numbers.
"So while last year we were avoiding value stocks, we like them now, and diversification right now means owning things that were scary last year.”
Matthew Yeates, deputy chief investment officer at 7IM, said: “Markets always gyrate, but when you are thinking about diversification you need to think about what you want to diversify away from and why.
"Right now of course people want to diversify away from the magnificent seven equities, but maybe those companies deserve to have performed well.
"One strategy we have on at the moment is to use index weighted, rather than market cap weighted, funds, as those capture the broadening out of the returns if that continues, but at the same time, if markets go into reverse, one would think it would be the frothiest stocks, such as the magnificent seven, would be the ones which suffer the biggest falls.”
Katerina Kosmopoulou, partner and fund manager at J Stern and Co, said industrial stocks were a particularly attractive sector right now as infrastructure spending is increasing around the world.
You can listen to the podcast by clicking on the link above.
