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

  • From condoms to caskets: merchandise marks Canada's 150th birthday

    Economic CBC News
    It's been said that Canadians are not brash about their patriotism, but you wouldn't know it from the variety of merchandise, big and small, being snapped up in advance of Canada's 150th birthday July 1. From T-shirts to hats, flags to flasks, condoms to caskets, goods adorned with celebratory logos are popping up faster than you can say sesquicentennial. Source
  • Canadian lumber producers brace for second round of softwood lumber duties

    Economic CTV News
    MONTREAL -- Canada's softwood lumber industry is bracing for a second wave of U.S. duties expected to come Monday that could put further pressure on producers, particularly smaller ones, to cut jobs. The U.S. Source
  • Warning labels might be coming to cheese: CBC's Marketplace consumer cheat sheet

    Economic CBC News
    Miss something this week? Here's the consumer news you need to know from CBC-TV's Marketplace. Get this in your inbox every Friday. Sign up here. Fake drugs American prosecutors accuse CanadaDrugs.com and its CEO Kris Thorkelson of selling unapproved and counterfeit cancer drugs to U.S. Source
  • Debt, protectionism could drag down improving global economy

    Economic CTV News
    FRANKFURT -- The global economy has picked up and prospects for the next few months are the best in a long time. But the recovery is maturing and faces risks from populist rejection of free trade and from high debt that could burden consumers and companies as interest rates rise. Source
  • Air bag maker Takata bankruptcy expected Monday

    Economic CTV News
    DETROIT -- Drowning in a sea of lawsuits and recall costs, Japanese air bag maker Takata Corp. is expected to seek bankruptcy protection in Tokyo and the United States early Monday. Takata was done in by defective air bag inflators that can explode with too much force, spewing out shrapnel. Source
  • How Sears' troubles could hasten radical change in Canada's malls

    Economic CBC News
    Sears' plan to shut down 59 of its locations is grim news for the chain's landlords across Canada. Could it also spell doom for the nation's neighbourhood malls? Anchor tenants — typically big department stores — have always been a critical component of mall design. Source
  • Proposed rules for CRA amnesty program could expose more tax-cheat advisers

    Economic CBC News
    The Canada Revenue Agency is tightening its amnesty program for tax cheats, including a proposed rule that could expose more of the shady advisers who set up dodgy tax schemes to help clients hide their money. Source
  • Italian PM 'guarantees' savers' accounts in 2 troubled banks

    Economic CTV News
    ROME -- Italy's premier says holders of accounts in two troubled Italian banks will have their savings guaranteed despite insolvency proceedings. Premier Paolo Gentiloni was referring to Veneto Banca and Banca Popolare di Vicenza, each struggling with unpaid loans. Source
  • Forget the poop scooping: who will pay the bills for your pet?

    Economic CBC News
    The scene is so common, it's cliché: Your adorable child looks longingly into your eyes, begging for a pet. You somehow navigate the emotionally fraught minefield of cat vs. dog. Then it's time to talk chores. Source
  • 'Eventually, many will run out': How an LCBO strike could impact restaurants and bars

    Economic CBC News
    A long drawn-out strike by liquor store workers could have a significant impact on Ontario's restaurants, wine importers, bars and consumers — but it may offer a boon to some local wineries. "Eventually, many [restaurants and bars] will run out, if not all, if it goes into a month, two months," said Tony Elenis, president and CEO of the Ontario Restaurant Hotel and Motel Association. Source