City Financial’s Peter Toogood agrees that risks remain high in 2016.
“For 2016, our central thesis is for a more volatile world, with greater downside potential, but also a year in which investors should start to accumulate unloved and out-of-favour assets.
“Buying the dips is going to be a challenging strategy for investors this year. A buyers’ strike is building in credit and equities have limited support – rather than ‘buy the dips’, we suggest ‘mind the gaps’ for now,” he added.
“T cautious view that we espoused throughout 2015 persists into 2016. Hence, we reiterate our preference for risk diversified absolute return strategies and long/short equity funds.
Jane takes a slightly different view. While he says equity exposure remains the firm’s core growth asset, it has been moving up the size scale into larger “more defensive” businesses, and away from mid-sized growth stocks and cyclicals, in a bid to cover the risk that profits decline as the economy matures while wages start to accelerate.
“This strategy enables us to continue to maintain a material equity weight should the market re-accelerate, while better protecting the downside in this uncertain environment,” he added.
Of course, there are many arguments to be made for a better-than-expected outcome to 2016, even for US equities – although, one would be hard pressed to argue that the risks are not tilted somewhat to the downside given how long in the tooth the current bull market is – but if the evidence of last week is to be believed a strong defence will be important in 2016.
