Whereas the broad consensus is a goldilocks state of affairs for the US and Canada, Lewis is fast to remind us of the substantial dangers on the market available on the market. Geopolitics, he says, takes a preeminent position. The US election, the continued battle within the Center East, and the push by Saudi Arabia to regain share in world oil markets level to myriad sources of instability. Decrease world oil costs, for instance, could also be a headwind for a resource-driven financial system like Canada.
“I believe the longer markets keep steady, the extra instability is created underneath the floor,” Lewis says. “It makes me nervous after I see markets very regular and calm, you don’t want a lot to spark a extra abrupt motion.”
Lewis says that his crew are actively defending their portfolios in opposition to the resurgence of market volatility. On the similar time, he argues that asset managers would do properly to take a long-term view. There may be nonetheless an excessive amount of cash sitting in money and cash market devices, sitting in defensive positions whereas markets have performed very properly. Lewis argues that traders needs to be seeking to deploy that capital, although not within the slim band of US tech shares which have dominated. He argues for diversification throughout subsectors and kinds, on the lookout for small cap worth names which have a whole lot of valuation floor to make up. He argues that energetic administration, too, is usually a severe returns driver.
“Enhance diversification and revisit the extent of money. It’s a must to be cognizant of the dangers, however do not go too defensive,” Lewis says. “Even when we get volatility, central bankers have given themselves a really substantial buffer to regulate to financial circumstances. As painful as all these fee hikes had been, this creates an surroundings the place we will face political turmoil with extra ammunition to reply.”
