The publication provides an insight into the key drivers of Coutts’ three Chief Investment Officers and their investment strategy for 2013. Opportunities include: an energy renaissance, Japanese equities and the pharmaceutical sector, whereas the end of the bond bull market and the risk of inflation being re-ignited constitute the main investment risks.
Gayle Schumacher, Head of Investment Office at Coutts comments: "Although the markets continue to be challenging, we see at least ten reasons to be optimistic. Overall, progress is being made in the eurozone to contain ‘tailrisk’, the US elections and clarity of the Chinese leadership has coincided with improvements in their economies. As part of this, we expect a cyclical rally in Chinese equities next year and a bounce back in the US dollar and commodity-based currencies. However, risks remain inherent in financial markets and never more so than with politics. We believe the impact of political events and decisions, which have grown in the wake of the financial crisis, are a key risk."
The 10 investment opportunities are:
* Equities calling – Investors have shunned equities since the financial crisis but now is the time to reverse that strategy.
* Emerging markets – Developing countries look set to outperform their more established counterparts as growth and risk appetite return.
* Hunting down yield – Generous yields can still be found despite ultra-low interest rates around the globe, although investors must take a step up the risk ladder.
* Property’s rise from the rubble – Four years on from the financial crisis, the time could again be right for bricks and mortar to provide a good opportunity for investors.
* Top dollar: greenback to bounce back – The US dollar and commodity-based currencies are set to benefit most from improved global economic conditions.
* 10 reasons to invest in China – China’s slowdown is over and we expect these 10 factors to drive a cyclical rally in Chinese equities this year.
* An energy renaissance – The US oil and gas industry is experiencing a revival, fuelled by infrastructure and oil field services.
* Japan’s global pursuit – Its economy remains in the doldrums but Japanese equities could prove profitable investments over the long term.
* European bonds have the edge – European bonds enjoyed a spectacular 2012 and still offer attractive opportunities, including higher yields in the periphery.
* Pharmas find the cure to beat the patent cliff – New revenue streams, stable industry growth, attractive valuations and solid dividend yields offset the loss of valuable pharmaceutical patents.
The 5 investment risks are:
* Inflation: the unintended consequence? – Aggressive easing by central banks risks re-igniting inflation.
* End of the bond bull market – Bond investors face the threat of capital losses as the 30-year rally slows.
* Power play: political tensions – Since the financial crisis, politics around the world have become an unavoidable and dominant factor on the investment landscape.
* Debt: it’s payback time – Borrowers repaying their debts could have dangerous ramifications for the global economy.
* Eurozone survival: it’s in the hands of the politicians – Politicians will determine the fate of the euro as austerity and monetary easing by themselves will not be enough to save the currency union.
Gayle Schumacher continues: "2013 could be a seminal year marking the reversal of the trend underpinning returns in recent years and a potential equities comeback. There is a step change, with bonds no longer the safe-haven asset they were perceived to be. As bond valuations reach extreme levels, we are mindful the prospect of investors losing money in this is real. Risk management is all the more essential and we continue to place this at the heart of every asset allocation decision we make."