(Marketwatch) Wells Fargo Investment Institute strategist head of global asset allocation strategy Tracie McMillion said it was unlikely 2020 would bring such outsize returns. Investors should consider taking gains in the New Year, she said, and then put the cash back to work when political or other stresses push markets lower.
“If the pattern of resilient markets continues in 2020 as we expect, investors should find opportunities to take profits when markets exceed our price or yield targets ranges. There also may be chances to put cash back to work when political or other stresses push markets below our target levels,” McMillion, head of global asset allocation strategy, said in a note.
“By rebalancing in this way, cash can become a tactical tool that may enhance returns if market swings become more pronounced, as we expect,” she added.
In an uncertain environment Wells Fargo Investment Institute favored a focus on quality, and in particular U.S. large cap companies with strong balance sheets and growing dividends or share buybacks. Analysts highlighted stocks in the information technology and consumer discretionary sectors. They added that investors could play defensive with consumer staples, real estate and utilities sectors.
Longer-term diversification will be key, McMillion added, as 2020 could be fraught with shorter periods of volatility led by political, economic and monetary policy uncertainty.
“Investors may reduce short-term volatility risk by using cash tactically, focusing on high-quality assets and positioning into more defensive asset classes and sectors.”
