With the effects of the pandemic receding and a flood of information sources about world events aiding investment managers in thier risk assessment, there shouldn’t be any reason to take copious amounts of risk off the table according to a panel of researchers at the Professional Planner Researcher Forum in Sydney Monday morning.
While acknowledging the complications caused by recent geopolitical events including the war in Ukraine, Scott Haslem, chief investment officer at leading wholesale advice group Crestone, said there are enough information channels for managers to incorporate the risks into their investment process.
“Geopolitical risk is pretty hard, it’s often a difficult area,” Haslem said. “But I certainly would say that it’s no longer an acceptable answer to say ‘it’s too hard, it’s too binomial, I can’t factor that in’.
“There’s enough research going on around how [Russian President Vladimir] Putin and [Chinese Communist Party leader] Xi Jinping get on and what the implications of the Iranian oil deal is for China, and how that impacts their interaction with North Korea,” Haslem continued.
“I wouldn’t necessarily be making big calls on that, but I think you can see how that would impact some long term structural threat trends around inflation, or how that would impact supply chains, or how businesses move from just in time inventory management to just in case inventory management and how that impacts inflation.”
In the rearview mirror
The pandemic is another world event that should no longer be used as an excuse for the egregious, blanket avoidance of risk, according to Peter McPhee, senior investment specialist at Loomis Sayles.
“Where do the institutional investors think the winners and losers are going to be on a sectoral basis? They’re clearly in the boat that Covid is disappearing in the rearview mirror quite rapidly, they’re very much a part of the ‘get back to work’ side,” he said.
While Loomis Sayles won’t vouch for any sector holus-bolus, the investment manager will be looking at the markets with less pandemic concern in the near future.
“We’re not picking sectors over individual stocks, but certainly areas that we think are going to be interesting are ones like travel and health care where there’s going to be a movement towards a pre-pandemic normal.”
