Smart money moves you could consider making in 2017

In the ever-changing investment landscape of 2017, where political noise from the US, UK, and Europe continues to create uncertainty, investors are seeking guidance on smart money moves. Maximilian Kunkel, a cross-asset strategist at UBS Chief Investment Office, recently shared insights on CNBC Africa regarding potential investment opportunities and strategies. Kunkel highlighted several key points that investors should consider when navigating the current market dynamics. One of the primary recommendations from Kunkel is to focus on the United States, where there is an uptick in key economic indicators such as growth, inflation, and interest rates. He suggests overweighting US equities, high yield assets, senior loans, and treasury inflation-protected securities. Despite the potential for market volatility, Kunkel remains optimistic about the prospects for US investments in 2017. Another key area of discussion was the impact of President Trump's policies on the bond market. Kunkel noted that Trump's emphasis on infrastructure investments could lead to increased borrowing, raising concerns about inflation. However, he also pointed out that foreign investors find US treasuries attractive, given the accommodative stances of central banks like the BOJ, ECB, and Bank of England. This foreign demand could help balance any upward pressure on treasury yields. When it comes to the equities market, Kunkel expressed confidence in the strength of US earnings and highlighted the positive contributions from sectors like energy, consumer spending, and financials. Despite concerns about the impact of Trump's policies on foreign investment and trade, Kunkel believes that strong fundamentals will continue to drive US equity performance in the coming months. Shifting the focus to Europe, Kunkel acknowledged the challenges posed by demographic trends and structural issues in the region. While the ECB's accommodative stance has delivered some positivity, Kunkel suggested that monetary policy may have reached its limits in stimulating growth. He anticipates that the ECB could announce tapering measures later this year, signaling a shift in policy approach. In terms of emerging markets, Kunkel emphasized the improved fundamentals compared to previous periods of market turmoil. He noted that higher real interest rates, resilient current accounts, and reduced reliance on commodity exports have strengthened the resilience of emerging economies. However, he cautioned that protectionist policies could impact certain markets more severely, highlighting Mexico as a vulnerable economy due to its heavy reliance on US exports. Regarding the bond market, Kunkel advised a balanced approach between equities and bonds, considering the ongoing macroeconomic environment characterized by low growth and inflation. He noted that while the 'great rotation' from bonds to equities may not materialize, investors should seek inflation hedges in assets like equities and real assets. In conclusion, Kunkel discussed the potential for gold as a safe-haven asset in times of political uncertainty. He pointed to the dual factors of negative real rates and increased political risk as drivers for a potential uptick in gold prices. While UBS does not recommend direct commodity exposure, Kunkel sees tactical opportunities in gold as a hedge against market volatility. Overall, Kunkel's insights provide a comprehensive outlook for investors looking to navigate the complexities of the 2017 investment landscape. By focusing on key markets, understanding policy dynamics, and diversifying portfolios, investors can make informed decisions to capitalize on emerging opportunities.