How to find all-weather funds for every investment outcome

Equity indices have hit record highs since the US election, which initiated a big shift into equities and out of bonds in developed markets. Investors believe in the new pro-growth environment, driven by tax cuts, de-regulation and infrastructure spending, but these are yet to be confirmed.

In fact, while the markets initially rose on hopes of economic stimulus from the Trump administration, they subsequently retraced as prospects for rapid policy changes receded, followed by renewed concerns about Brexit negotiations and as the long-awaited Trump tax proposals came up short on detail.

Investor concerns are also increased by political uncertainly at home and abroad, and whether or not the markets, particularly US tech stocks, are currently in bubble territory.

All this raises the question about where to invest money around the globe. Decisions will, of course, be influenced by personal attitudes to economic prospects. But whether you're an adventurous, pro-growth optimist; a pessimist in fear of market correction; or an investor who wants to be prepared for any eventuality, there are a number of options.

Recession, inflation, volatility

Some economists argue there is still a high chance of a global recession within the next couple of years. Global growth is expected to slow down significantly, dragged by overleveraged developed economies, while the "Trump trade" is set to fade. Inflation, meanwhile, continues to accelerate due to extremely low rates and excessive QE.

Investors feeling nervous about where markets are heading at the moment could consider funds with indirect exposure to gold such as Blackrock Gold & General and Investec Global Gold* in their portfolio. In the past gold has performed well relative to equities and other risk assets during periods of extreme economic turbulence, market volatility and high inflation.

Alternatively, investors might consider multi-asset funds such as Investec Cautious Managed and Newton Real Return. They use gold tactically, and are very cautious and risk averse in their outlook.

Trump trade is on

Another camp of economists argue that Trump will succeed in pushing a significant stimulus package through Congress. This will boost economic activity and consumer spending in the US, with spillover effects to the rest of the world. Commodity prices rise and labour markets tighten further, with the result that inflation rises. As a result, market valuations would be seen as attractively valued.

Funds like First State Global Resources and Guinness Global Energy would allow investors to gain exposure to natural resources and energy-related equities. If you believe commodities and the oil price can recover from today's low levels these funds remain a good way to access the growth potential of the sector in the coming years.

Investors might also consider the JB EF Luxury Brands fund and Fidelity Global Consumer Industries, a Money Observer Rated Fund. Both funds provide exposure to the high-growth premium brands sector. With global wealth expected to rise 6 per cent annually, driven by the growing wealthy middle class in China, Asia and North America, global consumer spending could turn to premium goods.

The cautious optimist

Despite the political uncertainty and difficulties in normalising monetary policy, a majority of economists remain cautiously optimistic on the outlook for the global economy over the medium term.

With global economic indicators strengthening and earnings picking up, global markets are expected to deliver modest returns. Central banks' policies could still keep asset prices supported, and market volatility may present opportunities to enter markets at attractive levels.

Funds like Artemis Global Income and M&G Global Macro Bond, both Money Observer Rated Funds, could help investors achieve capital growth over the long term whatever the market conditions.

Artemis Global Income fund provides exposure to global companies with strong free cash flow and dividend growth, and benefits from a flexible macro-driven investment approach. That means the manager is able to adjust the portfolio to suit the prevailing climate.

M&G Global Macro Bond fund invests across a broad range of fixed income assets, including bonds issued by governments and companies in developed nations and emerging markets. The ability to invest anywhere and in any currency gives the fund the freedom to select those assets the fund manager believes are likely to benefit from the prevailing market trends and economic condition.

Investors might also consider more specialist funds such as Polar Capital Global Insurance, another Money Observer Rated Fund, which aims to achieve capital growth through investment in companies operating in the international insurance sector.

Finally there's First State Global Listed Infrastructure. It invests in the shares of companies involved in utilities, highways, airport services, marine ports and services, oil and gas storage and transportation. Over the past decade global listed infrastructure has delivered higher returns than global equities with a lower level of risk.

Whatever your view on markets, a well-diversified portfolio should help investors successfully navigate political uncertainty and market volatility, and give the best possible chance of generating a positive outcome whatever the market throws at us.

interactive-investor-logo-small-sizeThis article was originally published on our sister website Interactive Investor.

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