There are still ample investment opportunities in the capital market, despite tariffs being imposed by the US expected to hurt economic growth globally, according to panellists at a forum organised by Asia Asset Management and the Brunei Institute of Leadership and Islamic Finance.
Denis Cole, principal and portfolio specialist of emerging markets debt at PGIM Fixed Income, says he expects to see higher demand for higher quality fixed income assets in the current environment of elevated uncertainty.
“The opportunity for fixed income to outperform equities is very significant,” he said during the panel discussion.
Cole was one of five panellists at the panel session titled “Managing global portfolios in the new era”. The other panellists were Sue Lee, director, Asia Pacific head of index investment strategy at S&P Dow Jones Indices, Charles Lee, senior fund manager at Phillip Capital, Norfazrina Zaini, portfolio manager, listed debt strategy at Brunei Investment Agency, and Farah Amer Hishamuddin, senior credit analyst and ESG lead at BIBD Asset Management.
While the US trade policies may be a cause for concern for many investors, S&P’s Lee said that equities investors appear to remain somewhat optimistic on outlook of the US equities market.
She said the Volatility Index, commonly known as VIX, has been hovering at a low level over the past few months. VIX is a measure of the stock market’s expectation of volatility based on the S&P 500 index.
“The market is basically saying that [the US tariffs are] going to pass, and the impact of inflation will be limited,” she said.
Meanwhile, Phillip Capital’s Lee said the firm reduced its allocation to the US equities market in the fourth quarter of last year, as he believed that there would be more volatility post-US presidential election.
“However, when Liberation Day took place, we ramped up our allocation,” he said. He added that volatility look set to become more intense moving forward due to tariff negotiations.
Although there’s opportunities for fixed income to outperform equities, Cole said there are risks looming in the US economy.
“The bigger issue is that the US is on an unsustainable fiscal path, and there is no political will to solve that problem. The Republican’s focus is on tax cuts, and the Democrat’s focus is on spending,” he said.