A perfect storm for equities; the Fed's cut to stimulus; weakness in China's economy; and the continuing rout in the emerging markets - all conversions and global stocks plunging to 2.5-month lows. Hargreaves Lansdown's Richard Huntersays don't downplay the emerging market run-off, and go for globally-focused companies that can compensate elsewhere for EM losses.
JOURNALIST ASKING "Is this just a perfect storm or a storm in a teacup?"
JOURNALIST: "What are you telling your clients then? Are you saying to put your eggs in more baskets or are you still telling them to stick with the bottom-up approach?"
HUNTER: "We've been saying about the bottom-up approach probably for the best part of the last two years at the moment. These tend to be globally-focused companies with a lot of diversification both in terms of geographically but also their business lines. In the case of Diageo again today, it means that if one area is underperforming, they can pick up the slack elsewhere. Equally, this kind of quality blue chips tend to be very cash-generative, tend to have reasonably stable income, and of course equally important in the current interest rate environment tend to be high-yielding in terms of dividends."
JOURNALIST: "So like Diageo, what other stocks do you like? What else are you looking at? You mentioned these stocks have to be diversified."
HUNTER: "Yes, one of the stocks that we think could do rather well this year and it's something of a stock market darling is WPP. Obviously, there's a number of things which should play into its hands this year, not least of which the midterm congressional elections, the football World Cup, and the imminent Winter Olympics. Quite apart from that of course, because of its US presence, and whilst the Publicis Omnicom merger is being worked through, potentially mean that those companies take their eye off the ball temporarily. The fact that the US economy is turning around could well lead to increased confidence in terms of company spending. And of course, if that happens, one of the first things to go during a financial crisis, namely the advertising budget, could well return with a vengeance. And if it does, this sort of company like WPP is well placed to benefit from that."