There are three challenges facing investors going forward, Willem Sels, chief market strategist at HSBC Private Bank told Fin24 during a recent visit to South Africa.
These are: low global growth (though he does not foresee a US recession); low incomes from bonds and cash; and geopolitical uncertainty and how to try and manage it.
At the same time, HSBC is of the opinion that there are still enough investment opportunities out there.
"If you have large cash balances, it will be a drag on your investments. Rather be invested, but not with high risk," suggested Sels.
"The mistake investors make is to keep 30% in cash and then they are forced to take higher risks with the remaining 70% of their portfolio."
That is why Sels prefers an approach of rather focusing on the quality of assets.
"In the current low-yield market, (HSBC) mainly stays in the investment grade space and selectively in high quality emerging market bonds," he said.
In Asia HSBC likes India and Indonesia due to their increase in lower and middle class consumers. As for China, Sels said it is still of interest to HSBC, but "along certain themes".
When economic growth in the world is weak, it impacts manufacturing, including in China. China is also impacted by trade tariffs.
HSBC is under-weight in Germany because its economy is very trade and manufacturing based.
On the other hand, the US has a resilient consumer base and a deep and diversified market. The US remains one of HSBC's main investment markets.
Regarding sector specific focus, Sels said HSBC has an outright defensive stance.
"We like utilities, consumer staples and health care," he explained.
"Given geo-political uncertainties, we think it is very important currently to be geographically diversified. "
With the German economy now under pressure, he said there are increasing calls for the German government to spend more. In Sels' view, this spending could happen in the area of green energy.
Green investment is, in fact, getting growing traction with HSBC's client base.
"Just remember, environmental, social and corporate governance (ESG) type investments are not charity matters. It makes good business sense for both the company and the investor," said Sels.
At the same time, he cautioned that companies should avoid so-called greenwashing in order just to create the impression of being environmentally orientated.
"It will become clear very quickly if things are not genuine," he said.
As for the Fourth Industrial Revolution, Sels said it has made the smart use of data important in every single industry. It will create "winners and losers" and that is what a smart portfolio manager will look at to see who is using technology to its advantage.
"In our view, it leads to the need for more active portfolio management," concluded Sels.