Top Research Picks for June 2023

High inflation and interest rates coupled with the US troubles of debt and the increased geopolitical risks have caused volatility in financial markets. In this edition of our newsletter, market experts discuss key trends, the outlook in the second half of 2023, and assets to potentially weather the storm.?

Role of alternative assets in portfolio diversification

Financial markets have become unpredictable for investors after a series of stress tests. Due to high inflation and interest rates, stocks and?bonds have become positively correlated for the first time in years. Read More

“In alternative assets, we can find a number of important characteristics that could assist in a highly correlated market, including low correlations with traditional equity and fixed income assets, low sensitivity to market shocks, and insulation from rate hikes and inflation,” says HSBC Asset Management.

Global Market Outlook 2023 – HY Update

High inflation, rising interest rates, China’s reopening and stalling recovery, the failure of multiple US banks in quick succession — there is a lot going on around the world. How will this work out for global financial markets? Read More

“Global growth, while still positive, is trending lower year over year, as developed world economies that benefited from the post-COVID economic recovery are now suffering from more difficult comparisons,” as per Justin Truong, Investment Strategist at Mackenzie Investments.?

Emerging market debt in focus

In its monthly fixed income update, South Africa-based Ninety One talks about the events that impacted emerging market debt. The investment management firm says that the debate around the US debt ceiling was a key source of uncertainty while discussing the challenges and opportunities in various financial markets. Read More

"While risks surrounding US debt ceiling negotiations have now gone, markets are likely to remain volatile. Despite this backdrop, we remain constructive on the medium-term outlook for returns from the EM debt asset class," says Ninety One.

Pointers for investors eyeing US-China relations

Global markets have been impacted by the troubles between US and?China?over the past few years, and competition between these two powers creates risk and opportunity, as per T. Rowe Price. Read More

“The gradual decoupling of U.S. and Chinese technology appears likely to continue. Investors should be clear eyed to understand that a deterioration in relations between the two nations could increase the risk of further sanctions," says Michael Pinkerton, Washington Associate Analyst, US Equity Division, T. Rowe Price.

Dividend stocks are an all-rounder option

Global markets have somewhat calmed after volatility from inflation and?high-interest rates, but DWS says that there still are uncertainties and investors are wary. In these tricky times, dividend stocks may help investors weather economic storms. Read More

"The relatively calm markets of the past two months should not hide a certain disorientation among investors, reflecting the great uncertainties on the economy and inflation. Dividend stocks may help investors weather economic storms," says Bj?rn Jesch, Global Chief Investment Officer at DWS Group.

Time to consider small caps

Due to high volatility investors looking for risk-averse options, often avoiding small caps during a recession. Abrdn believes that this strategy might not be a good one, and the time to start allocating might be sooner than investors think. Read More

"We believe high inflation shouldn’t worry small-cap investors. Indeed, smaller companies have historically outperformed large caps in periods of elevated inflation," as per abrdn.

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