The top five contrarian plays of the year so far
By Kristen McGachey, 16 Feb 17
From betting on Europe over the US to sticking by emerging market debt, we look at five ways portfolio managers have stepped outside the box early on in 2017.
There has been a tremendous amount of hype around the US since the conclusion of the 45th presidential race, with many investors contrasting America’s economic strength against the fragility and political instability in Europe.
The fact that so many are over-estimating the stamina of the Trump-fuelled rally creates an ideal opportunity for a contrarian play in Europe, in the view of Whitechurch Securities managing director Gavin Haynes.
One of Europe’s biggest draws currently, according to Haynes, is the relatively low valuations of its shares compared with their American counterparts.
“In aggregate, European markets are cheap, and we do believe there is good scope for earnings growth. Right now, the profit margins of European companies are significantly below historical levels and below those of US companies.
Investors are also forgetting about two potential headwinds that impact the US more so than Europe – a strong currency and a rising interest rate environment in 2017.
“We see neither of these headwinds being key features of investing in Europe,” he stated. “Investors are pricing in a very negative scenario which would have resulted in very low interest rates for a sustained period. We think the economic outlook is looking a bit brighter, however, and we see more inflationary pressures coming through.”
Tags: Bonds
