Barbell Strategy Best to Beat Volatility: Barclays
Investors should use a "barbell strategy" using both stocks and debt to navigate the increased market volatility, according to the strategy team at Barclays Wealth in London.
A barbell strategy is usually a bond investment strategy in which the maturities of instruments in a portfolio are concentrated at the two extremes.
"We want to retain some exposure to pro-cyclical risk assets such as equities," Dean Turner, an investment analyst at Barclays Wealth told CNBC.
"But at the same time, we want some exposure to assets that will perform in a deflationary climate, and are now raising government bonds to an overweight," Turner added.
Turner said he is getting out of cash and corporate bonds in a bid to buy assets that will perform in a deflationary environment.
To fund the resulting "barbell" strategy we have extended our underweight in cash, and reduced also our weightings in other "in-between" assets such as corporate bonds, he explained.
Unconventional strategies like this can perform at a time when the collective investor mood is lurching between extremes by owning both pro-cyclical and deflationary assets, according to Barclays Wealth.
Buy Euro Sensitive Stocks
Turner is calling for investors to get into euro sensitive stocks.
"Those companies that enjoy a high level of overseas earnings are likely to benefit the most from the weakness of the euro," he predicted.
"Historically, the best performing sectors during periods of currency weakness have been information technology, oils, materials, consumer goods and industrials," Turner said.
"The worst performing sectors have been consumer services, utilities and financials."