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Risk assets a risky business in 2020

  • January 29 2020
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Invest

Risk assets a risky business in 2020

By Grace Ormsby
January 29 2020

Risk assets around the world will be vulnerable to a deterioration in investor sentiment in the coming year, an investment strategist has warned.

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Risk assets a risky business in 2020

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  • January 29 2020
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Risk assets around the world will be vulnerable to a deterioration in investor sentiment in the coming year, an investment strategist has warned.

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The chief strategist at Principal Global Investors, Seema Shah, has cautioned that the “significant disconnect between elevated valuations and only modest economic growth” has led to the forecast.

As a result, she is urging investors to maintain some defensive and nimble positioning in their portfolios as prospective returns are likely to be lower than they were last year.

Concerns she flagged as affected by sentiment include the “risk of a ‘shock’ outcome in the US presidential elections later this year, a fragile US–China trade agreement, bad-tempered US–Iran relations, potential for renewed Brexit risks as well as recent concerns of a virus outbreak”.

Despite this concession, Ms Shah has touted the benefits of emerging markets for investors in the year ahead, with stronger returns likely to be found in such regions.

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“Emerging market valuations are more attractive, while their economies (especially emerging Asia) will be supported by the lifting of US–China trade tensions, a slightly weaker US dollar and policy space for further rate cuts,” she explained.

But she did counter that investors will need to carefully pick their allocations if they do take the emerging market route.

“The merits of active management in emerging markets will be clear, as geopolitics and domestic political hotspots are likely to create clear winners and losers,” the chief strategist continued.

“Markets will likely penalise governments who reflate their economies without regard for already sizeable debt piles and/or inflationary risks.” 

Risk assets a risky business in 2020
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About the author

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Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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