Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • Consultants
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2023
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
Breadcrumb
  1. Home
  2. MONEY MANAGEMENT
January 07, 2019 12:00 AM

Managers guarded on expectations for stock, bonds in 2019

Sophie Baker
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Stone Studios
    Epoch Investment Partners' William J. Booth

    Money managers think 2019 will be a year for caution when it comes to asset exposures.

    In 2018, the MSCI ACWI returned -11.18%; Russell 3000 index, -6.99%; MSCI Europe index, -17.22%; Bloomberg Barclays U.S. Aggregate Bond index, 0.01%; and the Bloomberg Barclays Global Aggregate Bond index, -1.2%.

    Looking ahead, sources think returns will be even harder to come by.

    "While our focus is on equities, we stay abreast of the broader capital markets due to their linkages," said William J. Booth, managing director, co-chief investment officer at Epoch Investment Partners Inc. in New York.

    "We think that U.S. equities can produce mid- to high-single-digit returns, driven by high-single-digit earnings growth and a 2% cash dividend yield, partially offset by likely valuation contraction due to higher rates and increased market volatility," Booth said.

    Fixed-income markets, particularly high-yield bonds, "are significantly mispriced vis-a-vis equities and could be at the epicenter of the next financial crisis," he warned.

    Eric Lascelles, chief economist at RBC Global Asset Management Inc. in Toronto, thinks the "risk environment is high and it doesn't feel like the time to take particularly aggressive risks as uncertainty is (also) high."

    He thinks higher yields and still-elevated stock markets show the "risk premium is about as small as we've seen it dating back to the crisis. We might expect to squeeze a little more out of the stock market than bonds, but only a small amount and (investors would be participating) in a more volatile ride."

    Mr. Lascelles also thinks there are "less compelling opportunities in terms of shifting across asset classes — it might be time (for) sticking close to home," and having some exposure to both stocks and bonds "might prove a reasonable strategy as there are fewer screaming opportunities."

    Some money management executives are more cautious when it comes to fixed-income markets for 2019 than other asset classes.

    "We are cautious on bonds over the medium term as we see firming inflation and expect yields to rise faster than market expectations," said Shoqat Bunglawala, head of the global portfolio solutions group for Europe, the Middle East and Africa and Asia-Pacific at Goldman Sachs Asset Management in London.

    "We believe credit spreads are range-bound and are cautious as historically we have seen spreads begin to widen as we come to the end of the expansion phase of the economic cycle," he said.

    Charles K. Bobrinskoy, vice chairman, head of investment group and a portfolio manager at Ariel Investments LLC in Chicago, said executives there are "nervous about fixed income, particularly long-term bonds." He cited the normalization of interest rates as something that "will be tough on the bond markets next year."

    On the positive side, David Riley, chief investment strategist at BlueBay Asset Management LLP in London, thinks investors will look at structured credit and collateralized loan obligations to gain exposure to credit and floating-rate assets.

    However, some are still keen on risk assets. Seema Shah, senior global investment strategist at Principal Global Investors in London, said since a recession is not forecast for 2019 the firm still prefers risk assets — "equities over fixed income, but within equities there is major regional dispersion."

    "We have become more negative about U.S. equities, starting in the second quarter. We are inclined to look at reducing exposure to U.S. equities, but there are still a lot of global opportunities around. Japan is looking attractive," she added.

    Ryan Primmer, head of investment solutions in New York at UBS Asset Management, said the firm remains positive on global equities going into this year.

    "However, with monetary policy conditions slowly tightening, heightened geopolitical risks and with the range of potential macroeconomic outcomes broadening in the U.S. as the cycle matures, we see a continuation of the higher volatility regime."

    But officials at the firm think higher volatility "does not preclude gains for equities — it simply means that the path ahead is likely to be bumpy and that risk-adjusted returns are likely to be lower," Mr. Primmer said.

    As for emerging markets as an asset class, Aviva Investors thinks the region excluding China is set for modest improvement.

    Michael Grady, head of investment strategy and chief economist at the firm in London, said it is "still appropriate to be underweight on duration assets, and we expect to see bond yields moving higher — not just in the U.S. but globally."

    But the firm doesn't think bonds will "be the asset class to give you the traditional hedge" this year.

    Related Articles
    Rebound expected for stocks, bonds as China emerges
    Hedge fund managers see chance to cash in on volatility
    Tougher future in store for European managers
    Managers see little recession risk in 2019
    Rebound expected for stocks, bonds as China emerges
    Hedge fund managers see chance to cash in on volatility
    Investors bearish on economy, value long-term creation over short-termism – sur…
    Recommended for You
    Zumbuehl_Elmar_2023_head-main_i.jpg
    GAM Holding names CEO
    Zinkula_Mark_head-main_i.jpg
    Thornburg Investment Management names CEO
    Larry_Fink_Speaking_2023_i.jpg
    Larry Fink sees large opportunities for deals to transform BlackRock
    Upside Ahead for Emerging Market Debt
    Sponsored Content: Upside Ahead for Emerging Market Debt
    Sponsored
    White Papers
    Exploring the Commercial Application of Artificial Intelligence
    Conflict Minerals: The human cost of our electronics
    Research for Institutional Money Management
    Private real estate entry points emerging amid selloff
    2023 Hot Topics in Retirement and Financial Wellbeing
    Bonds: Shaken, but Not Stirred
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • Consultants
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2023
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars