Ivan Moen, CIO, Jaap Westerling, director and Michel Alofs, director at Dutch asset manager Optimix Vermogensbeheer predict a temporary uptick in inflation. The team argues that rising price levels could offer opportunities for investors.
Despite US unemployment figures having dropped to 4.4% and US GDP growth picking up pace, president Trump has pledged to introduce further tax cuts, in a bid to boost the labour market. According to the team at Optimix, this additional stimulus could result in rising producer prices. This trend is set to be reinforced by a persistent increase in oil prices.
At the same time, the Optimix strategists predict that the rise in inflation will only be temporary, the team points out the temporary nature of these inflation drivers.
Nevertheless, the Optimix investors predict that investors could capitalise on a temporary rise in price levels, with value stocks becoming relatively more attractive than growth stocks. “Value stocks are relatively cheap, they consist of firms which tend to be cyclical and are therefore benefiting from a growth environment and rising interest rates” they argue. Optimix therefore intends to increase its exposure to value stocks.
Another asset class profiting from a rising rate environment are financials, according to the Optimix team. The strategists predict that a growth in lending activities and increased returns due to higher interest rates will benefit banks. Optimix has therefore increased its exposure to US financials.
The team also predicts that Japanese equities will benefit from rising interest rates in the US. They point out that listed Japanese firms tend to be export oriented and therefore particularly susceptible to an improved global growth outlook.