Jan Amrit Poser, Bank J Safra Sarasin
The current bull market in the US has become the longest in US history, beating the previous record bull run from October 1990 – March 2000.
Poser believes that the bull run will continue on the back of expected strong US company earnings this year.
“Peak earnings growth is not behind us yet. It is ahead of us because we have a very strong cyclical recovery. There is also still more to come because the US is doing more fiscal stimulus [through tax cuts],” he said at a media briefing in Hong Kong yesterday.
Poser added that the bank’s equity portfolios have benefited from an overweight position in the US relative to other markets. “It has really paid off, the trend is unbroken, we are reaching record highs all the time, so we stick to that.”
However, he noted that he prefers US small cap stocks to large caps.
“I think the rally in large caps, especially in technology, has been a bit overdone, and I think small caps should relatively outperform.”
Like other small-cap managers, Poser believes that small cap stocks provide “hidden opportunities” given that they are not well-covered by sell-side research analysts.
Year-to-date, the MSCI USA Small + Micro Cap Index has returned 13%, outperforming the MSCI USA Large Cap Index’ (10.39%), according to FE data.
The bank continues to be overweight in equities relative to fixed income, with a bias to US markets compared to emerging markets and Europe, Poser said.
Emerging markets wobble
The private bank has joined its wealth management peers in trimming exposure to emerging markets, which are down year-to-date. The MSCI EM Index fell -7.69% this year due to US tariffs, a strong US dollar and the financial woes of Argentina and Turkey.
“We’ve reduced emerging markets equities, especially with the trade war, but we still remain constructive,” he said.
A number of private banks and wealth managers are becoming cautious on the asset class.
For example, one of UBS Wealth Management’s biggest tactical position changes was reducing allocation to emerging market equities as the appreciation of the dollar hit the firm’s emerging market positions.
Participants in the Fund Selector Asia Asset Class Research, a quarterly survey of long-term (12 month) sentiment of fund selectors in Hong Kong, Singapore, Thailand and Malaysia, have also shown a markedly lower interest in buying global emerging market equities in June when compared to three months earlier.
Source: Fund Selector Asia
However, Conrad Saldanha, emerging market equities portfolio manager at Neuberger Berman, said there are opportunities in quality stocks in emerging markets, while Old Mutual Global Investors’ global equities strategist Justin Wells believes quality stocks are more resilient than value stocks in the current market environment.
