2013: HSBC more positive, sees gradual recovery in H2
Looking back at 2012, investors could be forgiven for being perplexed at the investment outcome for the year, says Willem Sels, UK head of Investment Strategy at HSBC Private Bank.
In spite of a global economic slowdown (with a few notable exceptions in the emerging markets) and even recession – and depression – in some regions, investment assets across the spectrum performed well.
Equities, fixed income and real estate generally delivered positive returns and investors have done well if they stayed invested and diversified. On top of the economic gloom, political events created a cautious sentiment amongst companies and individuals.
Looking to 2013, the picture looks somewhat more positive. The economic slowdown should trough during the early part of the year without the type of collapse we saw in 2008, to be followed by a gradual recovery in growth.
While we do not expect the recovery to be particularly strong, at least in the early stages, it will nevertheless be an improvement on this year. This, coupled with some of the political uncertainties behind us, should encourage investors to take more interest in real, higher yielding assets such as equities.
Given the still-attractive valuations on global equities, both historically and especially compared to bonds, these markets should do well. Safe haven bond markets, which have been propped up by the impact of quantitative easing on an unprecedented scale and are today expensive, could disappoint as perceptions on inflation and growth change. Cash remains an unattractive asset in this environment.
As long as central bank liquidity remains in place, asset price inflation should continue. Investors are in search of yield and value, benefiting equities, as well as high yield and emerging market debt. Short-term volatility is likely but this should provide better entry points for the medium term.