Portfolio managers and strategists at Neuberger Berman anticipate continued capital markets volatility through the second half of 2013 and into 2014 as a result of investor interpretation of the Federal Reserve’s easing strategies, concerns about economic growth prospects worldwide, and mixed signals in company fundamentals.
Looking ahead in 2013 and into 2014, Neuberger Berman managers and strategists see select investment opportunities globally within equities and fixed income. Among their views:
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- Large-Cap U.S. Equities: Attractive valuations on an absolute and relative basis, with an anticipation of acceleration this year. Valuations today still look attractive relative to other markets around the world.
- Small-Cap U.S. Equities: Continued positive outlook in anticipation of a pick-up in M&A activity, which is typically a supportive driver of small caps. The asset class remains well positioned within the context of an improving domestic backdrop and offers good exposure to the ongoing manufacturing renaissance.
- European Equities: Economic data may be bottoming while equity risk premiums are at more attractive levels compared with places like the United States. European companies are overcoming the labour costs that have burdened them and investors appear to have moved beyond the persistent sovereign debt fears of the past three years. Focus shifts more to growth than sovereign risk.
- Emerging Market Equities: Caution remains appropriate, with a focus on individual company fundamentals. Longer-term potential for emerging market equities remains intact.
- High Yield Spreads: The rise in high yield credit spreads is largely due to technical factors, including mutual fund outflows. Spreads should narrow with expected continued low defaults. Bank loans, attractive given their floating-rate structure, could provide an additional buffer should there be a more prolonged and pronounced rising interest rate environment.
- Global Fixed Income Opportunities: With the recent declines, our global fixed income team is finding opportunities in local currency emerging market debt, high yield bonds and agency mortgages.
The challenge for individual and institutional investors globally is managing the risk/return balance against a dynamic investment environment.
"As we approach 75 years in the investment management business, we are keenly aware of those challenges and take great pride in our ability to apply relevant lessons learned over multiple market cycles with modern and relevant solutions that meet client needs," said George Walker, chairman and CEO of Neuberger Berman.
"This past year, we’ve provided value to clients with expanded investment strategies as global markets present opportunities. We’ve brought in talented professionals and moved into new regions. We also further increased employee ownership, aligning our firm with clients," Berman added.
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