Trustnet Magazine Issue 13 December 2015 | Page 11

FUTURE
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However, it is Coombs’ favourite
region going into 2016. “With so
much volatility in the world, US
investors tend to stay at home,” he
said. “I expect financials there to do
well when interest rates rise.”
 Coombs’ key fund-pick:
Legg Mason ClearBridge US
Aggressive Growth

EUROPE

Despite Europe’s battle with an
abundance of macro-economic
issues, not least the threat of Greece
exiting the eurozone, the continent
has seen its popularity fly in 2015.
The region’s key attraction has been
its stock market-friendly ultraloose monetary policy – not only
are interest rates at just 0.05 per
cent, but in March the European
Central Bank launched a €60bn a
month quantitative easing (QE)
programme, which it has suggested
it may ramp up.
For de Bunsen, it is one of his
favoured bets for next year. He
admits that while Europe is by no
means fixed and that economic
growth is anaemic, he asserts that
the environment is improving.
“Company earnings momentum
is good and the consensus forecast
has eurozone GDP hitting 1.5 per
cent in 2015, rising to 1.6 per cent
in 2016,” he explained. “This is up
from 0.9 per cent last year.”
However, on the downside,
Coombs says: “In Europe, we
are witnessing the rise of a
more distinct politics – more
polarisation, which creates a
disturbance to economic policies.”
 De Bunsen’s key fund-pick:
BlackRock European Dynamic

JAPAN

Japan was hit with the news in
November that it had once again
fallen back into technical recession
territory, after it was reported that
GDP contracted by 0.8 per cent on
an annual basis in the three months
to the end of September. However,
despite the downbeat macroeconomic news, hopes remain
high for Japan, chiefly because, like
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 McDermott’s key fund-pick:
DESPITE EUROPE’S
Twentyfour Dynamic Bond
BATTLE WITH AN
ABUNDANCE OF MACRO- EMERGING MARKETS
Given the woeful time that
ECONOMIC ISSUES, THE emerging markets have endured
this year – and for a while before
CONTINENT HAS SEEN
that – they are for the bravest
ITS POPULARITY FLY IN
investors only. Driven chiefly by
2015
slowing growth in China, the MSCI

Europe, it is in the midst of a massive
QE programme and stocks are
appealingly priced.
For Hargreaves Lansdown’s senior
analyst Laith Khalaf, it is one of his
preferred areas for 2016. He says:
“Since 2012, corporate earnings in
Japan have risen by more than 10
per cent, compared with a fall of 5
per cent in the UK. Stock valuations
remain attractive too.”
De Bunsen adds: “Corporate
governance is improving in
Japan too, meaning more firms
are looking at returning value to
shareholders.”
 Khalaf’s key fund-pick:
GLG Japan Core Alpha

BONDS

The prospect of higher monetary
policy over the past year has sent
bond investors into a spin as higher
interest rates mean lower bond
prices. During 2016, this concern
looks set to grow, especially if the
Fed, as widely expected, hikes the
cost of borrowing and the UK later
follows suit.
De Bunsen says: “The only reason
to hold government bonds right
now is for hedging purposes,
because if markets take a dive, they
will at least provide a buffer, but
investors are not going to get much
bang for their buck.”
However, McDermott says that
while he is wary of bonds, he
asserts they are still a diversifier.
“We like strategic bond funds,
which invest in a variety of types of
fixed income sources, giving fund
managers the flexibility to navigate
tricky market conditions.”

Emerging Markets index is down
by a hefty 8 per cent year-to-date.
While more short-term pain is
generally anticipated, many experts
believe the sector’s well-documented
long-term potential remains. Khalaf
says: “There are positives; take
the demographics where there is
a growing middle class looking
to spend more money and in
addition, given the recent market
falls, on a valuation basis emerging
markets look attractive. But that
is not to say they could not fall
further from here.” De Bunsen adds:
“When somewhere is so unloved,
it can present some interesting
opportunities. We will be watching
emerging markets closely in 2016.”
 De Bunsen’s key fund-pick:
JP Morgan Emerging Markets
Income

PROPERTY

The backdrop of ultra-low interest
rates and uncertainty clouding
bond markets has driven investors
to plough billions into bricks and
mortar funds in recent years, as the
rents paid have provided a stable
income. The rewards have been
robust too, where over the past
three years the typical portfolio has
delivered a 26 per cent return.
But while McDermott is still
broadly positive on the asset
class, he believes investors should
temper their expectations as he
feels it would be unwise to bank on
the recent performance continuing.
He says: “I would anticipate total
returns of a more boring 5 to 8 per
cent going forward. Yields have
come down, too; however, you can
still pick-up north of 3 per cent.”
 McDermott’s key fund-pick:
M&G Property Portfolio
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