“As central banks flood the markets with liquidity, that pulls forward a lot of your returns,” the Zurich-based executive said. “That’s simply the way it is.”
Haefele joins his Wall Street counterparts in voicing concerns over returns this year after the MSCI All-Country World Index surged 24% in 2019.
Investors will likely face muted equity performance, coupled with about US$11 trillion ($14.8 trillion) in negative-yielding debt globally, according to UBS Global Wealth Management’s 2020 outlook. While it sees earnings growth of 10% and returns of low to mid teens for Asia ex-Japan shares, it expects a mere 5% profit growth at U.S. companies and a 3% contraction for those in the euro area.
Haefele recommends dividend-paying stocks and companies with greater profitability, lower financial leverage and less earnings volatility than the overall index. “A dividend strategy can provide that supplemental income and help protect your portfolio even if you’re forced to move into equities,” the investment chief said.
The money manager, which oversees more than US$2.5 trillion of assets, also recommends investing in 5G technology and gene therapy as themes for the decade.
“There’s going to be massive investments” in 5G, particularly in Asia, Haefele said. “You’re going to have rates of return in that sector that are greater than global GDP growth.”
