FIVE INVESTMENT THEMES 2020 CONFIRM THEIR POTENTIAL
THEME 1 – Quality never goes out of fashion: investing in high-quality companies
In a world characterised by persistently high uncertainty and major structural developments, quality stocks remain a core holding of choice.
This theme remains highly attractive. It is still an ideal core portfolio component. Global by nature, it can be applied in all equity markets. Companies with strong balance sheets, clear visibility on earnings growth and limited profit variability will remain in high demand.
THEME 2 – Defensive diversifiers: seeking low risk yields
Expected returns on good quality bonds are low. Therefore, investors will most likely move to other asset classes while limiting risks.
Diversification reduces the overall risk of the portfolio. Our recommendation: certain low-risk products or ones with a calculated risk like investment-grade corporate bonds, alternative funds, and structured products.
Such solutions benefit from the more volatile environment and greater differences in the quality of companies.
THEME 3 – Deglobalisation: beneficiaries of the reversal in global trade
The Covid-19 crisis will accelerate the deglobalisation trend. There are more signs that the supply chain disruptions due to lockdowns have led governments and companies around the world to reconsider their production models.
- Reshuffle of global supply chains and the creation of new production hubs
New production hubs with Taiwan & South Korea for upstream tech-related components/ products, and Southern Asia for low-end consumer goods.
- Beneficiaries in the US and Europe
High value-added industries, a wide range of service providers and education.
- Political/geopolitical uncertainty
Hedge with safe-haven assets (such as gold, JPY and tactical long USD opportunities).
THEME 4 – Benefiting from disruption: 5G and Artificial Intelligence innovations
This theme concerns all regions: The companies that play a key role are in the US, Europe, and Asia.
The 5G technology market will truly take off in 2020. Among others, it includes components and mobile network operators, semiconductors, antenna towers and software companies.
Innovation is developing at such a fast speed that idiosyncratic risks are very high. Broad diversification is necessary.
This theme has gained in importance with the Coronavirus crisis. Lockdown imposed on people on all five continents led to intensive use of the internet.
THEME 5 – Innovation in health care: technology multiplies discoveries and new applications
The health care sector is growing faster than the rest of the economy. Thanks to the development of the Internet, the means of communication, Big Data, data retention, and artificial intelligence, health care is changing dramatically and at all levels. As a result, there are new methods of research and development, new types of treatments, tools and services.
This theme is aimed at dynamic investors who are willing to take some risk, because innovation does not always produce the desired results. A long-term horizon is recommended.
The most dynamic or fastest growing companies in this area are often small and medium sized enterprises. But the risk is often higher because they are less mature, less diversified, and have less means than the large companies active in this innovative sector.
Therefore, alongside the equities of some leading companies, it is more prudent, for the riskiest segments, to invest through diversified funds, which are managed by highly specialised professionals.
The health crisis encourages further innovation in the sector - With fears of new diseases, health-related spending is expected to soar in the coming years and support many developments.
BNP Paribas Wealth Management is a leading global private bank and the largest private bank in the Eurozone. Present in three hubs in Europe, Asia and the United States, it employs over 7,000 professionals who support private investors in protecting, growing and passing on their assets, bringing long-term value to themselves, their families and society. The bank has €393 billion worth of assets under management as at 31 December 2019 and was recently named “Best Private Bank in the World” in Europe, in Hong-Kong and in US West. https://wealthmanagement.bnpparibas/en.html
servane.costreldecorainville [at] bnpparibas (dot) com
Chief Investment Officer at BNP Paribas Wealth Management
At the age of 54, Florent has more than 28 years of experience in investment strategy specifically dedicated to global Equities.
In 1996, he joined BNP Paribas Equities as Head of investment strategy.
In 2003, Florent took over the sell-side research of BNP Paribas Equities and Derivatives. Most of his time is shared between defining the investment strategy and meeting internal and external clients.
In 2008, he managed the buy-side research department for Global Equities and Commodity Derivatives (GECD), focusing on investment strategy and financial markets.
In 2012, Florent joined BNP Paribas Wealth Management to bring his strong experience to Private Banking clients. Along with his Chief Investment Advisors network (CIA), Florent defines global investment strategy and specific areas of investments.
Florent Brones holds a PhD in International Finance Economics and a strong track record as both an economist and a strategist.