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Investors should focus on income-generating equities

Samantha Hodge  |  21 Dec 2012Text size  Decrease  Increase  |  

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Samantha Hodge is a journalist with InvestorDaily, a Sterling publication.

 

Equity investors will continue to seek positive real returns in higher-yielding, income-generating assets at the outset of another challenging year, according to Fidelity.

Fidelity global chief investment officer for equities Dominic Rossi said that equity markets are likely to be event-driven and dependent on policy decisions from politicians and central bankers.

"What is certain is that we will see a significant, synchronised expansion of central bank balance sheets throughout 2013. With central banks committed to quantitative easing policies, what was unorthodox only a few years ago has become standard practice," Rossi told InvestorDaily.

Government bond yields, he explained, are likely to remain low, with real negative yields encouraging investors to seek positive returns in short duration, income-generating assets.

"In this respect, equity income remains an attractive story given the dividend yields available on equities compared to government bonds," Rossi said.

In terms of sectors, Rossi expects the market leadership seen over the last year to continue.

"Quality will remain a powerful theme and stocks with high returns on invested capital will continue to attract a premium," he said.

"I think selected healthcare, technology and consumer stocks remain attractive.

"Regionally, emerging markets are relatively attractive given their better growth rates and the fact that capital is likely to flow to investments in higher-yielding currencies.

"Indeed, I expect currency appreciation to be a growing theme in the emerging world given the synchronised balance sheet expansion at developed economy central banks," he said.