The bullish sentiment gripping global stock markets will hold, but investors should prepare to rebalance their portfolios in order to grow their wealth in the second half of 2021, according to Nigel Green, the chief executive and founder of deVere Group.As economies increasingly re-open and move into a phase of steadier growth, investors now need to be "looking ahead to a new phase: a move from recovery mode to sustained growth," says Green.
"The first half of 2021 was all about recovery from the pandemic. It was an impressive rebound with investor confidence soaring following a challenging previous year. As we move through this transition period, and the economic cycle continues moving rapidly, investors should prepare to review, and where necessary, rebalance their portfolios in order to grow their wealth and avoid risks in the second half of the year."
With optimism still high due to the vaccine rollout, low interest rates, massive government spending and soaring consumer confidence, the deVere CEO says that investors must not get complacent and should avoid the ‘buy everything' mindset.
Global growth is expected to accelerate to 5.6% this year, with the global economy poised to stage its most robust post-recession recovery in 80 years in 2021, according to the World Bank, Green points.
Winners and Losers
"Against the backdrop, investors will be actively looking to top-up their portfolios. However, in this volatile and transitory phase, now more than ever, investors must be selective as there will be clear winners and losers," he says.
"For instance, investors are likely to be interested in returning to those stock market sectors that benefit most from low bond yields, such as tech and other growth sectors, and ‘bond proxies' such as utilities and insurance stocks.
"Meanwhile, the value sectors such as financials and industrials, seen as plays on economic recovery, are likely to have a little bit of their shine rubbed off."
Investors should also move to ensure that they mitigate the risks of policy shifts in regard to stimulus agendas and financial support mechanisms, Green adds. This is because such shifts could "help drive divergences between sectors, assets and regions".
"In the second half of 2021, the overriding sentiment of global stock markets will remain bullish, but investors need to be aware that the landscape is quickly evolving from one half of the year to the other.
"In order to truly seize the opportunities over the two quarters, investors would be wise to review their portfolios with an independent financial adviser. As always, investors should be as diversified as possible in order to maximise returns relative to risk. This means geographical, sector and asset class diversification."" he concluded.