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Morningstar CIO: The time for bargains is nearing an end

Viewpoint: Value stocks and high-yield bonds attractive but key is diversification


Elena Johansson

The weeks in late March and April, after markets plummeted in response to the Covid-19 pandemic and an oil price war, may come to be seen as the peak opportunity for investors to pick up bargains, according to Dan Kemp, chief investment officer at Morningstar Investment Management Emea.

When asked how investors should approach possible market developments in the months and years ahead, such as bankruptcies, consolidations and fiscal stimulus with ‘green strings’ attached, he recommends thinking in terms of probabilities.

Kemp argues that investors should not seek to forecast events such as defaults and government interventions and allocate money in the expectation of a particular outcome but, rather, invest for a range of different scenarios.

In his opinion, investors should therefore allocate to strategies and asset classes that are able to overcompensate them in most scenarios, such as by investing in value stocks, high-yield bonds and ‘unloved’ regions and sectors, including the energy industry and the UK.