2020 Asia Pacific Equity Outlook
David Souccar talks about markets in 2019, long-term structural risks, performance over the cycle, investing in Japan, and international vs US exposure
Cheap liquidity combined with improved investor sentiment buoyed international markets in 2019. Nevertheless, long-term structural headline risks remain, such as the nature of the US’s future relationship with China and the prospect of difficult trade talks between the UK and the EU. Investors should concentrate on quality companies to help navigate long-term uncertainty.
Combining stocks in defensive growth sectors, such as consumer staples, with stocks in faster growth sectors like technology can help investors outperform over the cycle, capturing as much upside as possible while aiming to protect on the downside.
It is not a given that US markets will continue to outperform international markets as they have over the last decade. International valuations are currently more attractive and could ultimately converge with the US. In addition, international exposure gives investors access to diversification, different business models and potentially better companies in areas such as consumer staples. While progress on corporate governance is being made in Japan, investors should remain unconvinced by valuations.