Investment management firm State Street Global Advisors said, in a global market outlook, volatility is likely to remain a feature of markets as they contend with broader growth concerns, the capacity of central banks to stimulate economies and other geopolitical events including elections in the US and across Europe.
In the current environment, investors should be taking advantage of negative correlations.
“We generally see negative correlations between equities and bonds when interest rates are low,” the report said.
“This relationship has been consistent across the globe and across time. A negative correlation makes high-quality long bonds particularly effective at reducing equity risk, keeping this asset class attractive, despite low yields.”
The report also suggested boosting exposure to growth assets.
“With more capital to deploy, investors can seek return in traditional growth assets, like equities, high yield, real estate and private equity,” it said.
However, State Street Global Advisors said it was cautious on emerging market equities.
“We continue to monitor progress on structural reform in China and other countries, as well as government efforts to stabilise and stimulate growth in China.
“We see insufficient evidence to suggest that incremental growth in emerging markets is likely to be superior to that of developed ones.”
The report said earnings growth in this region appeared uneven and lacked momentum.