Hi, I'm Steve Chiavarone, Portfolio Manager, and Equity Strategist at Federated Investors.
Which asset classes are now most attractive to investors?
Based on the dashboard, and our overall analysis, we do not believe that we're on the verge of a recession in the next six to nine months, but we do think that rates are low and likely to stay low, or even go a little lower. So we think that dividend payers or growers, and the yield that they provide is really attractive in this environment. We think small caps can do better than expected, in almost a contrarian way. They're traditionally not known as late-cycle plays, but that's because rates are usually rising in the late cycle. Here, rates are falling. 50% of their debt is variable rate, and we think that puts them in a good position to do well, not to mention the strong IPO Calendar.
On the fixed income side, we don't think you need to be afraid of duration, so a good core bond fund makes a lot of sense. And then, finally, from an asset class perspective, if you're doing the alternative space, we think that you can do a little bit better in a multi-asset fund that has the ability to be tactical and move nimbly, given all the crosscurrents. Final piece of advice to clients is don't get caught up in all the recession fears and the hype. Continue to look at the data as it comes in. Be mindful of some of the risks, but, ultimately, the story that we see is, that for now, things look okay.
Views are as of September 6, 2019, and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Investments are subject to risk and fluctuate in value. There is no guarantee that dividend-paying stocks will continue to pay dividends. Small company stocks may be less liquid and subject to greater price volatility than large company stocks. Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices. Duration is a measure of a securitys price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities with shorter durations. Federated Global Investment Management Corp. 19- 10125 (10/19)