Petter von Bonsdorff, Head of International Business Development at Evli, shares his views of investors' expectations for the year ahead. What will be the allocation trends and what are Evli's predictions for 2020?
2020 will be more about risky assets
In 2019, the allocation trend has been out of equities toward less risky assets. Indeed, the news flow hasn’t been very encouraging for investors, but the prevalent under-confidence toward the markets has left many allocations to risky assets underutilized. With current low volatilities and expectations for downside easing, investors seem to be too cautious. The highly anticipated and discounted recession never materialized in the markets.
But in 2020, with interest rates still low, we expect flows back to risky assets like equities, corporate bonds, high yield and real estate. This year, the need for yield will increase and may be a harbinger for a revival in value stocks, especially in Europe.
A strong conviction on Europe and Nordic Corporate Bond
In Europe, many assets have fared worse than expectations and investors should seize upon these opportunities this year. Europe indeed offers many investment opportunities in 2020. Many investors view Europe as in decline with some macro data supporting this thinking, but we believe value appreciation in European High Yield (HY) bonds and Value stocks is likely. US HY investors should also look at European HY to potentially enjoy a much higher yield and lower volatility. The same idea applies to Emerging Markets investors, who should take note of the intrinsic values in the European equity markets.
Therefore, Evli views European corporate bonds and equities favourably in 2020. One of the best combinations of risk-return, an attractive macro backdrop and decent valuations is to be found in Nordic corporate bonds. Evli’s 20 years’ experience in this asset class through Evli Corporate Bond Fund should provide just what investors need to have a successful new year.