SINGAPORE–(BUSINESS WIRE)–In Singapore, as elsewhere, stock markets are facing heightened uncertainty stemming from rising inflation, slowing growth, the prospect of higher interest rates and geopolitical tensions. Amid this troubling changing backdrop, investors may wonder how to manage the resulting volatility within their portfolios or whether they should remain invested. Global investment management and research firm AllianceBernstein (AB) says that exiting a rocky market rather than riding it out can lead to worse outcomes for nervous investors.
AllianceBernstein’s approach to low-volatility investing targets companies with three fundamental characteristics: quality, stability and price, in order to help mitigate downside risks and generate greater returns for investors when markets recover. AllianceBernstein finds that stocks of quality companies with consistent performance patterns and trading at attractive prices are a good way to navigate volatility.
“Investors may be tempted to rush the exit in the face of short-term market pressures and wait for better times, but this can be a costly strategy in the long run. They may end up sacrificing good returns by de-risking their portfolio too, too soon, and then fail to reap the benefits during the subsequent recovery,” says Karen Lim, Managing Director, Southeast Asia Client Group. ” Instead of pulling money out of the market, investors can take a low-volatility approach to build a resilient portfolio that can withstand varying market conditions—a portfolio that can reduce losses in market downturns by capturing the most great advantage in a rising market in offer a smoother pattern of returns.”
Greater resistance in certain sectors
While most sectors have not been spared from the widespread market sell-off this year, some sectors have proved less volatile than others. The broad technology sector, for example, was one of the hardest hit sectors. But some tech stocks held up relatively well compared to previous declines, suggesting that technology has become entrenched and indispensable today.
“The technology sector offers a wide spectrum of opportunities. While some companies represent a strong bet for future growth, others offer predictable cash flows that make them inherently defensive,” adds Karen. “Highly profitable businesses with primarily recurring revenue, especially those with market or price leadership or those that offer must-have products, tend to provide risk mitigation in periods of volatility unlike their non-profitable counterparts.”
Some healthcare companies and consumers have also remained resilient despite the market turmoil. Within each of these sectors, there will be winners and losers, but AllianceBernstein has found that companies with strong cash flows and business models are likely to withstand market pressures and thrive in subsequent recoveries.
ESG – A broad approach
ESG considerations are deeply embedded in AllianceBernstein’s investment decisions across the company’s active portfolios—and in the way it engages with portfolio company management and stakeholders. In addition to integrating ESG factors into its research and investment processes, the firm has also developed a proprietary tool that leverages research insights from its global offices. By centralizing ESG research, sharing insights across offices and tracking engagement, AllianceBernstein hopes to deliver better investment outcomes for its clients.
AllianceBernstein brought its global investment management expertise to Singapore in 1993 and is committed to delivering superior results through research, portfolio management, wealth management and client service. With 26 offices around the globe, investors can be assured of the breadth and depth of investment capabilities with a strong track record of meeting the needs of a diverse range of clients.