Markets might be kinder for investors this year. Because, inflation has increased and the ingredients for a soft landing keeps falling into place. A chief investment strategist at BMO Wealth Management, Yung-Yu Ma, gave his opinion. Ma argued that there has been significant improvement in equity and fixed income returns. Diversification across entities in your portfolio would be a great help. Thus, investing in a specific stock means you need to consider the company’s pricing stock and demand.
Therefore, a balanced approach in the portfolio makes sense. However, Ma pointed out that it does not mean markets won’t be choppy for the next term. He said that a soft landing for the economy is not only possible but likely.
He added that any cash in the sideline would be in both equity and fixed income markets at least until six to 12 months. However, he is still bullish especially on the stocks’ value, the small cap ones to be specific. These stocks have outperformed over the past six months.
He expected that this outperformance would persist for the next multi-year basis. For real estate, Ma argued that the higher interest and mortgage rates are challenging. This headwind could remain for more quarters. However, they expect stabilization in those markets in the fourth quarter.
The other sectors like commodities decline in pricing. On the other hand, they remain a good hedge reflecting the uncertainty in the market. In addition there is also a decline in consumption in industrial metals necessary to support energy transition.