60 seconds with James Sym on the end of the current investment cycle

James Sym discusses the areas of the stockmarket which can prosper and those which may suffer at this stage of the cycle.


James Sym

James Sym

Fund Manager, European Equities

I think it’s safe to say we’re near the end of this investment cycle. What do I mean by that? Well, this investment cycle has been all about risk free and the price of cheap debt. Now, we think that’s coming to an end, and I think the catalyst for that is inflation starting to come back from next year, part of which is based around the oil price but also general inflationary pressures in the economy.

That’s got huge implications for what sort of European equities we want to own. What we’ve been doing in our funds is to try to buy those assets that have been very out of favour. That would be things like financials, commodity stocks, telecommunications companies - companies that can really benefit from rising interest rates and the rising inflationary environment.

Now, I look at a lot of these stocks and I feel they’ve got 50 to 100% upside, so there’s potential to make some good money out of that. Whereas, there’s another part of the market that looks pretty expensive which is clearly the bond proxies1 which have benefited from falling inflation and falling bond yields.

So that’s my outlook. I think it is hard to call the market levels; I’m not particularly bullish on the market. But within the market, because of this change in leadership - this regime change into higher bond yields - I think there’s potential for a huge amount of rotation and some really good money to be made.

1. Bond proxies are securities offering income streams similar to that of bonds; however, the yields can often be higher.

Important information: The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This article is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA, which is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored.