The sectors exposed to global GDP growth will drive 2013 market performance.
That’s because there was a strong push toward defensive stocks in 2011 and 2012, which means they’re already reasonably valued, says Nick Langley, investment director and senior portfolio manager of RARE Infrastructure in Australia.
His firm manages the Renaissance Global Infrastructure Fund, and co-manages the Renaissance Optimal Global Equity Portfolio, Optimal Income Portfolio and Optimal Inflation Opportunities Portfolio.
Langley adds, “Investors are getting comfortable with the global growth narrative. Going into 2015, sectors like U.S. rail companies [will surge] since they’re exposed and leveraged to increases in GDP growth in the U.S.”
Reade: Watch infrastructure stocks
The same goes for American wireless tower businesses, which are directly exposed to an increase in smartphone subscribers and data downloads.
“We’ve also got global trade picking up, so ports are [gaining traction], particularly those that have exposure to emerging markets,” says Langley. “They’ll benefit from increased intraregional trade, as well as trade with partners like the U.S.”
In terms of North America, he says both Canada and the U.S. are poised to move back into growth mode, with central banks being supportive.
“The government is a drag at the moment, but we see that unwinding over the course of 2013 and 2014. The private sector will drive growth,” says Langley.
On the other side of the globe, Japan is also receiving strong fiscal and monetary support for its economy.
Read: Hedge your bets on Japan
“They’ll be successful in restarting, but it will take a couple years. You can [already] see some strong expansion of the economy and of the market since it’s been discounting growth for a long time,” says Langley.
If your clients prefer emerging markets, they can look at Central and South America, particularly Mexico.
“Mexico is the new China,” he adds. It has low-cost labour, sustainable energy prospects, and a great location for shipping. This is why manufacturing and industrial are quite strong.
He warns Europe is a stock picker’s market. “We try to manage the risk, so we’ve been underweighting for a couple of years.”
Langley adds, “This will continue because Europe will have a lost decade. We don’t see a lot happening there up through to at least 2020.”
Time to buy in Europe, for more on how it’s a stock picker’s market