`Barbell' Strategy Is Best as Volatility Set to Climb, DBS Says
`Barbell' Strategy Is Best as Volatility Set to Climb, DBS Says
(Bloomberg) -- Volatility is likely to rise in the months ahead, and the best way to be prepared is to take concentrated bets at both ends of the risk spectrum, according to DBS Group Holdings Ltd.
Price swings across assets are currently low, but the advanced stage of the market cycle, moderating global economic growth and political uncertainty particularly in Europe hint at higher volatility to come, Hou Wey Fook, chief investment officer of Southeast Asia’s biggest lender, said by email Tuesday. He’s sticking with a “barbell strategy,” using both growth-oriented and more conservative investments, to outperform at such times.
Using that method in a global cross-asset portfolio, an investor could buy worldwide technology, consumer-discretionary and health-care stocks for exposure to growth, Singapore-based Hou said. At the same time, buying shares in defensive sectors that pay high dividends and purchasing government and corporate bonds that generate income would take care of the more conservative end.
Hou has advocated the barbell strategy since December. And he isn’t alone. Firms like Societe Generale SA and Morgan Stanley have recommended similar methods.
SocGen strategists advocated last month buying positions “in a kind of barbell structure, adding risks and new protection in tandem.” And Morgan Stanley strategists cautioned that the market was too confident in a Goldilocks scenario of solid but noninflationary growth, and too dismissive of the “tails” in both directions.
Price swings may be muted now, but “one has to be forward-looking about this. We expect volatility to rise in the coming quarters,” Hou said.
To contact the reporter on this story: Joanna Ossinger in Singapore at jossinger@bloomberg.net
To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Andreea Papuc, Ravil Shirodkar
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