The long bull market has spawned a lot of advice about the next big play, but analysts are now changing gears to tell investors boring is hot.
"This is not the time to be taking a big swing at the market. This is the time to be slipping quietly into the background," said Benjamin Pedley, head of investment strategy for Asia at HSBC Private Bank. "Sometimes when we come to do these roadshows and we're sort of upbeat and [say] 'this looks interesting,' what we're sort of saying now is just be a bit boring."
He expects increased volatility ahead, especially heading into a potential U.S. Federal Reserve move to increase interest rates this year, and noted that "crowded" trades such as the U.S. dollar and high-yield bonds could unwind aggressively. HSBC's private bank is advising clients to go neutral on equities, with an increased allocation to cash, and Pedley said he's focusing more on defensive plays, such as going overweight on Singapore stocks to capture a combination of defensiveness and high dividend yields.
Others have a slightly different take on how to play boring. Bank of America-Merrill Lynch is advising heading toward index components.
"The key mandate for consultants in selecting funds is to avoid paying active fees for benchmark hugging," analysts there said in a note last month. "Funds with high active share are considered to be more attractive. But by virtue of the calculation, maintaining high active share inadvertently forces portfolio managers into smaller names."