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

  • Trump's 'America first' tone worries head of Canadian oil and gas industry group

    Economic CTV News
    Trump takes charge: Sworn in as 45th president of the U.S.A. Source
  • Obama administration urges Canada to reverse Super Bowl ad decision

    Economic CTV News
    OTTAWA - In one of its final communications with Canada, the outgoing Obama administration is engaging in pigskin politics: asking the Trudeau government to overturn a regulation affecting ads during the Super Bowl. The U.S. Source
  • Oil and stock prices higher as Donald Trump sworn in

    Economic CBC News
    Stock markets responded to the first day of the Trump Administration in a largely positive way, with the Dow Jones, the Nasdaq and the S&P 500 all higher on the day of his swearing in. The Dow Jones Industrial Average was up by nearly 100 points to 19,829 just minutes before the new president formally acceded to the position. Source
  • Stocks higher as Donald Trump lays out glimpse of future economic policies

    Economic CBC News
    Stock markets responded to the first day of the Trump Administration in a largely positive way, with the Dow Jones, the Nasdaq and the S&P 500 all higher on the day of his swearing in. The Dow Jones Industrial Average was up by nearly 100 points to 19,829 just minutes before the new president formally acceded to the position. Source
  • Stocks close higher as Donald Trump lays out glimpse of future economic policies

    Economic CBC News
    Stock markets responded to the first day of the Trump Administration in a largely positive way, with the Dow Jones, the Nasdaq and the S&P 500 all higher on the day of his swearing in. The Dow Jones Industrial Average was up by nearly 100 points to 19,829 just minutes before the new president formally acceded to the position. Source
  • Navdeep Bains defends open borders for global trade in Davos speech

    Economic CBC News
    Automakers on both sides of the border fear the potential negative effects of a Donald Trump presidency, Canada's economic development minister said Thursday as he met with international business and political leaders in Switzerland. Navdeep Bains said he's been having nervous conversations with concerned automakers, both at the recent auto show in Detroit and during his current visit to the World Economic Forum in Davos. Source
  • Will Trump end globalization? The doubt haunts Davos' elite

    Economic CTV News
    DAVOS, Switzerland -- It's been impossible to escape the shadow of Donald Trump at this year's gathering of the business elites at the World Economic Forum in Davos, Switzerland. Uncertainty over what Trump will do once he takes office Friday and whether his presidency will mark the end of globalization dominated discussions all week at this event, which more than any has become synonymous with international business. Source
  • Sears, N.B. partner for a 2nd new business centre expected to create 360 jobs

    Economic CTV News
    TORONTO -- The New Brunswick government and Sears Canada Inc. announced their second partnership this week to open a business centre in the province with the help of millions of dollars of government funding. The provincial government is providing Sears (TSX:SCC) with about $5.2 million of funding to open its second new business centre in the province. Source
  • Canada's inflation rate rises to 1.5 per cent in December: StatsCan

    Economic CTV News
    OTTAWA -- Canada's annual pace of inflation ticked higher in December, but the rate was weaker than expected as lower food prices helped offset increases in the transportation and shelter groups. Statistics Canada said Friday the consumer price index in December was up 1.5 per cent from where it was a year ago, a higher rate of inflation compared with November's increase of 1.2 per cent. Source
  • Cheaper food offsets December hike in gasoline: StatsCan

    Economic CTV News
    OTTAWA -- Canada's annual pace of inflation ticked higher in December, but the increase was smaller than expected as lower food prices helped offset gasoline price increases at the pump. Statistics Canada said Friday the consumer price index in December was up 1.5 per cent from where it was a year ago, a higher rate of inflation compared with November's increase of 1.2 per cent. Source