23rd December 2011
This piece typifies the prevailing mood: "Dull, defensive and boring appears to be the new vogue for investors and I believe we will need more of the same attitude next year. Funds that control their risk and show an emphasis to preserving capital on the downside will remain popular. There is a growing demand for income and in a year where capital growth forecasts are pessimistic, total returns from income and growth are the order of the day."
Part of the problem is that the areas likely to rally if there is a resolution to the Eurozone crisis are not for the faint-hearted. For example, Nick Kirrage and Kevin Murphy, managers of the Schroder Income fund and Mindful Money bloggers, have been overweight selective banks on valuation grounds. Their reasoning for doing so is here. They are natural contrarians and used to periods of discomfort in order to reap the rewards of any rally later on, but this may be too uncomfortable for many.
However, there are thoughts that bombed-out cyclical companies may have a better year in 2012, notably the mining sector. Jack Malvey, chief global market strategist at BNY Mellon Asset Management, says that despite subdued demand from ailing economies, commodities could have a good year in 2012: "Investors are focusing more on what can go wrong instead of the potential upside," he said. "The last few years have been rough on equities. Folks are doing a lot of rear-view mirror gazing, looking to make the same trades as in 2011, which may not be a good idea."