Global CIO Michael Strobaek: "Remain well diversified"
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Global CIO Michael Strobaek: "Remain well diversified"

The year 2019 was very positive for investors, with many equity indices ending at record highs. Yet, the new year brought sobering news: US-Iran tensions escalated, bringing geopolitical risk back to the fore. In the new Global CIO video, we look at the latest developments and our current views.

The US-Iran flare-up took everyone by surprise, though tensions had been building for months. In general, geopolitical risks and tensions tend to be transitory, i.e. they tend not to impact markets over the medium term. In the short term, however, they could lead to higher volatility. We do not expect the conflict to escalate as it is in the mutual interest of both sides to deescalate. Nevertheless, it is prudent for investors to keep such risks in mind in the months ahead.

We have not adjusted our House View in light of the geopolitical tensions in the Middle East. However, our first Investment Committee meeting of 2020 was timely in that it allowed us to take stock of the strength in cyclical assets in recent months and assess how to manage risks adequately.

Watch the new Global CIO video with Michael Strobaek, Global Chief Investment Officer, to learn about recent market moves and our latest outlook for investors.

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De-risk and diversify

We continue to see attractive return potential in equities. But we believe that some equity markets may be subject to some reversal in the near term as equities are a bit extended. Against this backdrop, we believe now is a good time to de-risk our strategy and tactically take profits on our successful overweight in equities by shifting to a neutral stance.

We maintain a cyclical tilt by moving to a positive tactical view on commodities, an asset class that stands to benefit from the recovery in manufacturing that we expect in coming months. In currencies, we shift back to a neutral view on the USD index, as the industrial recovery should be weaker in the US than in other regions.

Looking out to 2020, we still expect that this year could be a good one for financial markets in general, and equities in particular. Investors should remain well diversified with a multi-asset portfolio that exposes them to sources of returns throughout the world.