The British pound may see a decline of around 10 percent to around $1.20 or $1.22 if a “no deal” Brexit is probable which continues to push investors away from purchasing United Kingdom assets.
Wayne Bowers, Northern Trust Asset Management’s Asia-Pacific CEO, stated that his portfolio remained “risk-on” with forecasts for around 6-8 percent global equity returns for 2018.
Bowers believes that if the UK attempted leaving the European Union without securing a trade deal sterling can be hit again. “This, I think, will suppress any significant gains we could expect to see from the pound…We are probably looking at 1.20-1.22 level I suppose. With the pound at these levels and with the potential for it to go lower, UK assets…could be picked up at a lower price going forward” Bowers said.
Bowers anticipates for global stocks to improve to the roughly 20 percent increases seen year to date, with the gains coming from certain sectors such as technology. While tech companies’ high share price valuations are often seen as too high, he believes they are warranted.
“If you accept that companies are, in aggregate, implementing digitization strategies, then the historical references that we have used for those companies are perhaps out of date. The question is what value do you ascribe to companies that have a more serious view on digitalization … will they be the winners? You can argue I think the market does justify the high level of valuations, on top of this global growth environment” Bowers said.
Bower’s other positions:
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Heavy in high-yield U.S. bonds yet has recently been reducing; light in investment grade debt.
Heavy in emerging markets leaning towards Asia.
A big no for cryptocurrencies, but believes there is great potential for blockchain technology to improve capital markets efficiency.