Insider Q&A: Allianz strategist on how to navigate market turmoil

WASHINGTON -- Last year was the stock market's first down year since 2008, and this year has opened with a thud.

See Full Article

The market is down 8 per cent in the first two weeks of trading, the worst start to a year ever.

Kristina Hooper, head of U.S. capital markets research and strategy for Allianz Global Investors, says investors shouldn't panic, but they can take steps to navigate the market's perils. Her answers have been edited for clarity and length.

Q: Given the turbulence in the stock market, should investors be worried?

A: The quick answer is they should be cautious, but they shouldn't be worried.

Q: Did the Federal Reserve's decision in December to raise its benchmark rate for the first time in nearly a decade play a part in the market's volatility?

A: Absolutely. We are living through monetary policy history being made. What we are seeing now is an unwinding of incredible conditions in monetary policy in the United States. So it stands to reason that we are going to see a lot more volatility as the Fed normalizes.

Q: What headwinds do you see facing the economy?

A: The Fed tightening is one. Historically, stocks are hurt out of the gate with Fed tightening. But typically, stocks are able to recover and post more positive gains over the longer term because tightening usually coincides with an improving economy, which is normally a good thing for stocks.

But we do have other headwinds such as geopolitical risks. We have seen signs of that with a flare-up in the Middle East with Iran, Saudi Arabia and other countries. Our view is what is going on with China is not cause for panic, but it certainly is a cause for caution.

Q: What stock-market sectors do you think will do well this year?

A: We would focus on those sectors that look attractive from a valuation perspective and earnings and, even more important, from a revenue-growth standpoint. Certainly, the technology sector has been able to deliver in terms of revenue growth. Health care could be another area. The aging population is a great secular trend.

Q: What about the energy sector, which had the biggest drop in 2015?

A: Energy company stock valuations look attractive. But until we get greater visibility over what the catalyst might be to drive oil prices higher and sustain them, we need to be cautious.

Q: Do you see investment opportunities overseas?

A: Yes. One important playbook to think about is the accommodative central bank playbook. It certainly benefited the United States, and it is currently benefiting European stocks and Japanese stocks. And valuations look attractive in Europe.

Q: Should investors think about dividends?

A: Absolutely, particularly given our view that volatility will be increasing. Dividend-paying stocks have historically offered significantly lower volatility than the overall market. In an environment of muted returns, dividends will play a very important role. Dividends can make the difference between a negative or flat return and a slightly up return.



Advertisements

Latest Economic News

  • Feathers fly as chicken shortage shuts KFCs across Britain

    Economic CTV News
    LONDON - Fast-food chain KFC has been forced to close most of its 900 outlets in Britain and Ireland because of a shortage of chicken The company is blaming "teething problems" with its new delivery partner, DHL. Source
  • N.L. unveils 12-year plan for offshore oil, gas development

    Economic CTV News
    ST. JOHN'S, N.L. -- Cash-strapped Newfoundland and Labrador has announced a 12-year plan to speed and enhance development of its offshore oil and gas resources. The province will review regulations and advance tie-back technology to allow more extraction at existing sites with less cost. Source
  • N.L. unveils plan to double oil production by 2030

    Economic CBC News
    The Newfoundland and Labrador government launched a new plan on Monday for growing its oil and gas sector. Highlights of Advance 2030 include doubling offshore oil production by 2030 through reducing development time for projects. Targets for the plan include drilling more than 100 new exploration wells, and tapping into multiple basins to produce more than 650,000 barrels of oil per day from new and existing projects, as well as commercial natural gas production. Source
  • Your auto insurance will be cheaper if you sign up in this month: LowestRates.ca

    Economic CTV News
    Your auto insurance rate is cheaper if you sign up when the weather is warm. That’s the key takeaway from a two-year price analysis by LowestRates.ca. The financial product comparison website found that rates quoted in Ontario were at their lowest between July and October, dipping by as much as six per cent in August 2017 from the annual average. Source
  • Canadian lumber producers buoyant about 2018 with high hopes for duties

    Economic CTV News
    MONTREAL - Softwood lumber duties aren't dampening the spirits of Canadian lumber producers as strong demand from rising U.S. housing starts and tight supply is expected to keep prices high throughout 2018. The number of U.S. Source
  • Markets rise as investors' jitters ease

    Economic CTV News
    SEOUL, Korea, Republic Of - Asian markets were higher on Monday following Wall Street gains last week, as investors' jitters showed signs of easing. Many major markets were closed on holidays. KEEPING SCORE: Japan's Nikkei 225 jumped 2 per cent to 22,149.21. Source
  • European shares drift lower as traders take a breather

    Economic CTV News
    LONDON -- European shares drifted lower Monday as investors paused for breath following a sizeable rally last week. Despite the move lower, there are few signs of the turmoil that gripped stock markets earlier this month. Source
  • European stock markets drift lower, North American markets closed for holidays

    Economic CTV News
    TORONTO - European stock markets drifted lower Monday while the major North American markets were closed for a holiday. In London, the FTSE 100 was down 49.79 points at 7,244.91 with less than an hour left in regular trading. Source
  • Montreal's Oreo cookie plant prepares to shut its doors

    Economic CTV News
    MONTREAL -- There was a time when the whole neighbourhood surrounding an east-end Montreal bakery would smell like baking Oreos. But that era comes to an end this month when snack-maker Mondelez International closes its Montreal factory for good. Source
  • Oilsands tech touted for pipeline capacity boost still years from deployment

    Economic CBC News
    Two years after a blue-ribbon panel called on the Alberta government to encourage partial upgrading of bitumen from the oilsands to enhance value and free up more pipeline room for exports, the idea remains years away from commercialization. Source