4:19 Event introductions
10:46 Introductions by the FMC CEOs
19:45 views of the recent market volatility from Reddit, Gamestop and Robinhood from the younger generation?
28:25 Markets outlook for 2021
42:51 Is cash King or Trash? Where are your firms focusing on 2021?
58:11 Slido results
Excerpts from the session
What are your views of the recent market volatility from Reddit, Gamestop and Robinhood from the younger generation? (19:45)
Boon Kiat: It is very easy to be dismissive about the broader trends with what has happened recently and the intentions behind these younger investors. Some people label it as irrational exuberance, but I think there is some level of overconfidence involved. The broader trend is that younger people are getting more educated and curious about investing: they ask many questions, and are critical thinkers. I believe things are moving in the right direction.
Gerard: I believe that there is some level of euphoria going on wi.h these oddball stocks. We have to understand human nature: all of us like some form of entertainment especially in investing. People like to have bragging rights, there is a political angle, David vs Goliath. Due to my job, people have been asking for investment tips from me and I hold half a dozen stock picks for talking points.
Jenny: We are currently in a very different investment environment, where there is high liquidity, low interest rates and also a rallying market. While it may seem like the entire market is rallying, there is significant divergence within sectors, geographies and credit risks. Technology is disrupting businesses across different industries, and hence it is important to diversify your investments.
What are your comments on expectations on market volatility and returns across fixed income and equities in 2021 (28:25)
Gerard: It is important to understand the context and the investment landscape that we are in, rather than trying to forecast the markets. This is a low interest rate environment, with interest rates at 50 year low and very tight credit spreads. Stocks have also priced in the expectations of a post-COVID world, with relatively high PE value.
The US change in administration, and there is also a loose monetary policy from the US Federal Reserve. Contrary to what is taught in finance, we see the trend where income investors have to invest in dividend yielding stocks for stability, while investing in fixed income and bonds for capital appreciation due to the low interest rate environment that we are in.
Boon Kiat: I believe that the key drivers for the market in 2021 will be rates and recovery. Rates in this case refers to the market interest rate, while recovery refers to how fast the economy recovers from vaccine programs.
These drivers will be moderated by other factors such as the current high market valuation and inflation. Inflation should be cyclical, rather than structural, since technology has been helping to drive cost down. There are investment opportunities this year in the fixed income and equities space, but we need to moderate our investment returns expectation. I also believe that this is the year where Asia will have a lot of focus, as Asia is heart of many of global megatrends.
Jenny: We see that there will be a divergence in recovery across different economies. Governments across the world are still preparing stimulus as the COVID-19 is not an economic crisis, it is a health crisis that has led to huge social problems. The low interest rate environment will make it difficult for asset managers and investors to get higher returns. Many of us are still holding on to a huge amount of cash, and we should consider deploying it to risk assets.
China is a market to watch due to how well they have managed the pandemic, and also because of the attractive interest rates of China fixed income products.
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