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Investment areas to consider in 2018

22 November 2017EconomicsEmerging MarketsOutlook
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Investment sectors to consider in 2018

  • 36% of guests at our Autumn Outlook event saw value in tech stocks
  • Citi however favours technology sectors plus financial and materials sector too
  • Unregulated Cryptocurrencies were also discussed at the event

On 18 October, Citi hosted their Autumn Outlook event, inviting guests to hear from three leading voices in markets – Jeffrey Sacks, Director Investment Strategist for Citi EMEA, Matt Williams, Director and Product Strategist for BlackRock, and Luca Paolini, Chief Strategist for Pictet.

After discussing the investment opportunities in global markets, Citi's panel drilled down further, exploring the potential opportunities in other areas. When asked which assets they felt could offer the best return over the next five years, 36% of the evening's guests voted for tech stocks, followed closely by healthcare stocks (29%) and then Emerging Market (EM) equities (18%).

Citi favours emerging markets at this time

Globally, Citi's preferred sector is financials at this time, due to good growth prospects and affordable entry points in spite of price increases. But of the top three answers in the poll, Sacks suggested that Citi "prefers emerging market equities by some distance."

"Emerging countries are not dependent on another upturn in the global commodity cycle," said Sacks. "This time, it's domestic demand driven."

Technology and healthcare continues to show promise

Within the tech landscape, there has been a rise in demand for robotics – particularly in countries with worker shortages. In August this year, Japan had 1.52 jobs for every applicant - the highest since 19741. "There are very clearly winners and losers," said Williams. "In IT, you have companies like ASML, who benefit from extremely strong research and development which should offset their historic valuation. But if interest rates go up, there could be a problem for the more leveraged names in the sector."

According to Citi analysts, the healthcare sector seems to be showing top-line growth, but recent changes within this sector may have made it increasingly difficult for companies to stay profitable. For instance, many US investors have chosen to steer away from healthcare stocks after drug pricing was questioned by both presidential candidates of the 2016 election2.

Discussing cryptocurrency

In light of emerging investment trends, cryptocurrency was also covered in the event's discussion. Paolini explored the appeal of a small investment in this sector – considering the relatively low costs and the potential for high return. "We're living in a world where central banks are becoming less independent," he said. "And many are worried that in the next recession they could just start printing money. It's difficult to put a valuation on cryptocurrencies, but some could make a successful story, not a fad."

However, this market is currently unregulated, and as such, Citi does not advise investing in cryptocurrencies at this time. As the event's host, Citi's Products and Advisory Director Vidur Varma said, it may be one to watch over the next 10 years, as the market gets more established.

Whichever sector you choose to invest in, one takeaway from our Outlook event is the importance of keeping an optimised and diverse portfolio. If you'd like to discuss the event's topics in more detail, your Relationship Manager is always on hand for further advice.


1 https://www.japanmacroadvisors.com/page/category/economic-indicators/labor-markets/job-offers-to-applicant-ratio/

2 https://www.forbes.com/sites/toddmillay/2017/03/17/two-reasons-to-invest-in-healthcare-stocks-now/#1571cc691b0b

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