Jean-Christophe Gerard, new interim EMEA head of Barclays Private Bank has offered his investment themes to hedge the risk of the current economic climate, singling out commodities, linkers and emerging market bonds.
Gerard has been unveiled as interim replacement for the departing Francesco Grosoli, who leaves Barclays after a 12-year tenure.
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In a statement from Barclays announcing his appointment, Gerard listed his main investment themes, which provide the foundations for the advice he is currently offering to clients.
Inflation risks and investment
“While our economic forecast is for inflation and growth to be average, we see risks of higher inflation now that the Fed has expressed very clearly the symmetry around its inflation target and the job market remains extremely tight.
“To hedge this risk, we would look at linkers, gold, real assets as well as stocks with pricing power and low price-elasticity.”
Investments for late-cycle environment
“The cycle is edging towards the end but we do not expect a recession in the next 12 – 18 months, especially now that central banks have turned more dovish.
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By GlobalData“Historically, commodities, linkers and emerging market bonds have done well at this stage of the cycle while credit starts to lag behind other asset classes. In equities, we recommend to look for ‘quality’ companies as well as secular growth story.
“We also see more opportunities for stock selections over passive investment.”
Enhancing total return on investment with yields and carry
“With price returns expected to be low to mid-single digit in equities, we look for yields and carry to improve the return.
“In bonds, with the Fed on pause, emerging market hard currency bonds start to be an interesting proposition again after a difficult 2018.
“In equities, we would focus on companies with growing dividend. The growth component is important in order to avoid ‘value traps’.”
Investment tactical opportunities
“One characteristic of late cycles as mentioned above is the increase in tactical opportunities. Markets are easily unnerved by a string of bad data, as happened last December, and current geopolitical tensions add to this nervousness.
“This will provide us with short-term opportunities (one to three months) that will not be for every client but which could be appealing for some.”
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