Dollar debasement and zombie companies: 5 investment strategies we heard today
Source
Uncertainty over U.S.-Iran peace talks in Pakistan continues to shape investor sentiment, with optimism for a potential settlement keeping a cap on oil prices and propping up equity markets. European stocks followed Asian peers higher in early trading, with South Korea's Kospi index hitting a record high overnight. Meanwhile, U.S. futures are pointing to tentative gains when Wall Street opens. The tech-heavy Nasdaq broke a 13-day winning streak on Monday after the S & P 500 Tech sector enjoyed its longest winning streak since February 2017. Here are five investment strategies we heard out of CNBC's London and Singapore studios on Tuesday to help navigate the noise. Beware zombies Liz Ann Sonders, chief investment strategist at Charles Schwab, sees complacency in the market, highlighting speculative flows into unprofitable stocks. "I think you want to fade the non-profitable zombie companies because...access to capital, access to credit, probably will be constrained for those smaller companies. You want to lean into the profitable, higher quality, especially down the cap spectrum." Flip the script Max Kettner, Chief Multi-Asset Strategist at HSBC, said investors need to tune out the geopolitical noise, and instead focus on earnings fundamentals. "My view right now is very simple; You just basically download a performance picture for March, and you flip it — you buy all the stuff that didn't work and you sell the stuff that worked." Dollar debasement Emmanuel Cau, head of European equity strategy at Barclays, expects the euro to extend recent gains against the dollar. "We think the dollar debasement story is still the playbook and the euro should benefit from that. But whoever is based outside the U.S. and invests in the U.S. equity market should hedge currency exposure." U.S. assets are attractive U.S. assets continue to be attractive, according to Global CIO at HSBC Private Bank Willem Sels, who said pricing is currently relatively attractive compared to rival markets. "It is a bottom-up stock-picker's market, clearly. But, if you look at the U.S., it's trading at its lowest premium [to Europe] over the last three years. The technology sector, probably our favorite sector at this point in time, is trading at the lowest premium versus other sectors over the last five years." AI boost for small caps Jeffrey Schulze, head of economic and market strategy at ClearBridge Investments, believes the rollout of AI technology will have major upsides for small-cap stocks, which "have a lot more costs embedded into their structure that can be right-sized." "I think it's a key reason why small caps can fare better versus large cap companies over a multi-year time horizon, because the adoption of this technology is much quicker than any major technical technology that we've seen in the past."