Investors are advised to increase their investments in global bonds, healthcare stocks and gold during the remainder of 2023 as risks rise from the Mideast war and high interest rates, says Tisco Wealth.
Nattakrit Laotaweesap, head of wealth advisory at Tisco Bank, recommends investors increase investment weight in foreign debt instruments, healthcare stocks and gold because these safe assets would enable them to profit amid the market fluctuations.
“There are several pressing factors in the fourth quarter, including the conflict between Israel and Hamas while the current high interest rates have added to tightened financial conditions and put pressure on economic growth,” he said.
Finally, some stock markets remain expensive, notably the US bourse where the 2024 profit is “too high and does not truly reflect the economic situation there”, said Mr Nattakrit.
Bloomberg forecasts that listed US companies’ profits will grow 12% this year, in contrast with the US economy which is expected to grow only 1%.
Foreign debt instruments include government bonds and corporate debt instruments in developed economies such as the US, Europe and the UK.
Bonds should have a medium to long-term lifespan with credit ratings of AA- or higher and a holding-to-maturity rate of more than 5%, which is higher than the interest rate of Thai debt instruments, now at around 2.5%, he added.
If the economy shows signs of entering a recession in 2024, prompting central banks around the world to reduce interest rates, investing in foreign debt instruments will give the opportunity for making higher returns.
Defensive stocks such as healthcare stocks have strong earnings prospects because demand does not slowdown if the economy shrinks.
In addition, companies in this industry have the ability to increase product prices as well as control costs when production costs increase, he said.
“The profit of the healthcare industry is stronger than that of other industries. Companies in this sector can grow amid a recession and they often generated returns that beat the market forecast during previous recessions,” he said.
In 2024, healthcare stocks are considered a high-growth, inexpensive group with analysts predicting earnings will grow by up to 15.4% compared to the previous year, compared with profits of companies on the S&P500 that are are likely to expand 12.2% year-on-year, he said.
Gold remains a safe haven asset as the financial market is gripped by uncertainties in an economic crisis or a war.
“As the economy slows down and geopolitical risks make it difficult to predict future trends, Tisco recommends investors diversify some investments into gold because it should help generate good returns,” said Mr Nattakrit.
Gold is also supported as central banks around the world reduce dollar holdings and increase gold reserves. The precious metal is an asset that will see demand from both central banks and investors, he said.