Global investment opportunities

The year 2022 was marked by significant market discussions revolving around inflation, interest rates, oil prices, and geopolitical tensions globally. As investors look ahead to 2023, the focus shifts to where the opportunities lie in a volatile and uncertain environment. Deborah Slava, Portfolio Specialist Director of Morningstar Investment Management SA, provides valuable insights into the current market landscape and how to construct a resilient portfolio strategy amidst the ongoing challenges. Slava emphasizes the importance of closely monitoring portfolio construction in the face of central banks' efforts to curb inflation and geopolitical tensions. Slava highlights the rarity of the sell-off witnessed in 2022, emphasizing that such crises often create investment opportunities. While cautiously optimistic about the future, she acknowledges the need to balance risks and opportunities in the market. Utilizing a four-lens approach - absolute, relative, contrarian, and fundamental risk perspectives - Morningstar forms its asset allocation views. Slava expresses bullish sentiments towards South African equity and bonds, as well as certain pockets in the global fixed income markets, particularly US treasuries and corporate bonds. When it comes to global equities, Slava identifies emerging market equity, communication services, and energy as top picks for generating future returns. She underscores the significance of finding managers with specific styles to capitalize on stock opportunities and sectors. In the emerging market equities space, Slava points to opportunities in China, Brazil, and Mexico, emphasizing the importance of navigating the risks and opportunities in these regions. Regarding China, Slava discusses the decision to allocate to the market in late 2020, citing favorable valuations and relative attractiveness compared to other markets. Despite the challenges of navigating China during lockdowns in 2022, Morningstar has maintained its positions and is considering a conviction upgrade as lockdowns ease. Overall, the approach to global portfolio structuring involves a nuanced evaluation of market conditions, opportunities, and risks to optimize returns in the ever-evolving investment landscape.