SINGAPORE (Reuters) - Global equities may be close to the end of one of the longest rallies in history, making developed markets such as Europe and Japan safer bets than emerging markets, the chief investment officer of a multi-family office said on Thursday.
Speaking at the Reuters Global Investment 2018 Outlook Summit, Rob Aspin, chief investment officer of MW Capital Management, said he would not be surprised if equity markets fell in 2018 as the rally falters, so he would recommend sticking to safer developed markets.
“We are not expecting 2018 to be a particularly bullish year,” Aspin told the Reuters Summit in Singapore on Thursday. “If anything, it could prove to be a tipping point and we could see a degree of selloff.”
The Dow Jones Industrial Average .DJI and broader Standard & Poor's 500 index .SPX have more than tripled since 2009. The MSCI All Countries World Index .dMIWD00000PUS has almost tripled over the same period.
Aspin said he does not expect the U.S. Federal Reserve to be particularly aggressive in raising rates, but feared the broader tightening of policy by major central banks will hurt stock prices. The reason to avoid emerging markets, he said, was their tendency to be more volatile than average.
“So, if we do see a selloff in the developed markets, due to either valuations, a shock to the system or indeed liquidity being pulled out, that will have an impact on emerging markets.”
The MW multi-family office, which handles investments for ultra-rich high-net worth individuals, goes after uncorrelated, steady-state returns, and that implies seeking alternative asset classes, such as hedge funds.
About 35 percent of MW’s funds are allocated to hedge funds, including a large one to U.S.-based hedge funds. Aspin expects to stay similarly invested next year.
Aspin’s preferred picks among emerging markets are Russia, India and China, although MW’s direct allocations to these markets are small. He reckons China is a good relative bet for the longer term but expects the Chinese markets to be relatively weak next year as the authorities tighten cash conditions to reduce levels of debt leverage.
MW also holds about 6 percent of its funds in gold XAU=.
“We think it’s quite important to hold gold, particularly given current central bank policy,” Aspin said, explaining it was necessary to hedge both against the risk of real interest rates going negative if there was another sudden slowdown in global growth or a rise in inflation.
MW is also looking at investing in bitcoin BTC=BTSP, Aspin said, although he believes the market is in its infancy and it was premature to pick possible winners among companies in the blockchain sector. He plans on making a small allocation to a fund manager that trades in bitcoins and other cryptocurrencies.
“My expectation is what will happen with bitcoin will follow what we saw in 1999-2000 with the internet, for example - a massive rally and a massive selloff and then you are able to pick the winners from the rubble that perform quite well in the longer term,” Aspin said.
“I think there is a massive future for coins, particularly for bitcoin given its network, but I think it’s still very much in bubble phase, so I wouldn’t be allocating any significant amount at this point. It will just be a very small allocation.”
(For a graphic of Foreign flows into Asian bond markets click tmsnrt.rs/29uYjbz)
(Graphic - China- An economic snapshot: tmsnrt.rs/2iO9Q6a)
Reporting by Vidya Ranganathan; Editing by Neil Fullick