Considering our base case return which suggests a rather muted uptick in stock prices, we advise investors to consider the following as they make equity investment decisions in H2-18:
1) Buy the dip!
Rather than outrightly avoiding equities in H2-18, discerning investors can buy low in H2-18 and wait for a rebound to sell higher. To do this, investors must see beyond the temporary market volatility and critically assess the best-in-class stocks affected by panic sales in H2 -18 to benefit from market repricing after the election.
2) Dividend play: Choose stocks with consistent dividend profile
Notwithstanding the distraction in the political climate, we are of the view that investing in dividend stocks is clearly strategic, considering the dynamics of the market in H2-18. Thus, we advise investors to pay attention to stocks with consistent dividend payment profile, stable earnings, and stock market liquidity.
3) Overweight on value stocks
Finally, we advise investors to focus on value stocks. In buying the dip, investors must choose stocks which have demonstrated a solid history of resilient revenue growth, earnings stability, dividend consistency and positive market sentiment. By implication, the outlook for the market in H2-18 suggests a general downtrend which may depress valuation for these stocks.