After the volatility in equity markets last year, Angelien Kemna is not taking big bets in 2003.
"In all my 15 years of experience I don't think I have had a more boring (equity) portfolio," she said. The firm is concentrating on the merits of individual companies and is "basically neutral" across sectors at the moment in both the United States and Europe. But she has not abandoned sector bets altogether, and is willing to increase sector bias once clear trends become evident.
She is favoring "sound" telecommunications, media and technology stocks such as Vodafone, and is invested in energy, health care and consumer staples.
Ms. Kemna's fixed-income portfolio will be favoring emerging market debt, high yield and corporate credit this year. She is overweight in these sectors as she expects only a slight recovery in the U.S. economy.
"We expect that, as in 2002, U.S. consumers will continue to do their jobs (of spending on consumer goods) backed by increased in-house prices," she said. Industrial growth and corporate spending should gradually return later this year once U.S. companies have finished cost cutting and balance sheet restructuring, Ms. Kemna said. She doesn't expect to see the Fed raise interest rates until almost the end of the year.
But the possibility of war in Iraq is the wild card in the pack for Ms. Kemna's predictions.
"If the Iraq conflict is short and effective, as was the case in Afghanistan, we could expect some kind of relief rally in the financial markets. A war of longer than several months, with knock-on effects in other countries in the Middle East, could slow economic recovery in the U.S. and deflate consumer confidence," she warned.
But Ms. Kemna is gloomy about growth prospects for Europe.
A recovery in Europe will depend not only on a pickup in economic growth in the United States, but also an improvement in eurozone exports and a weakening of the euro against the dollar. Exports are the only sector likely to contribute to growth in Europe this year as industrial output has fallen, consumer spending has been held back by relatively high inflation and unemployment is rising.
Chief executive officer and chief investment officer
ING Investment Management Europe
The Hague, Netherlands
Assets under management: e457 billion ($461 billion)
U.S. GDP: 3%
U.S. CPI: 1.7%
Dollar to euro: 1.03
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