Pakistan grabs attention in Bloomberg’s ‘Where to Invest $1 Million Right Now’

May 13, 2024 (MLN): Experts were asked to point to the best investment ideas in today’s global markets if they had to invest $1 million right now.

Of the five experts Bloomberg queried, one focused on “frontier” countries like Pakistan, which are getting sponsorship and aid from countries around the world because they are following through with deficit reductions and being more fiscally responsible.

Andrea DiCenso, portfolio manager and strategist, Loomis, Sayles & Co. said that in terms of the classic 60/40 portfolio, instead of the usual mix of 60% in stocks and 40% in fixed income, she’d put 60% of a portfolio in fixed income and 40% in equities, as Bloomberg reported.

For the first time in about 20 years, Treasury risk premiums are more attractive than equity risk premiums, she said.

For the 60%, “I really like the global high-yield universe. Within that, emerging market sovereign debt ex-China looks tremendously attractive for the first time in quite some time.”

A lot of “frontier” countries, many of which are known for being serial defaulters, are in a different part of their default cycle now.

"We’ve seen more populist leaders replaced by centrists who are being more fiscally responsible," she noted.

For the first time in a while, these countries are doing the right thing — and they are being rewarded with capital flows while investors are being rewarded with double-digit yields.

These are countries like Argentina, Ecuador, Pakistan, Lebanon and Egypt.

Egypt, for example, is getting sponsorship and aid from countries around the world because they are following through with deficit reductions and being more fiscally responsible.

The International Monetary Fund and the World Bank have announced new financial support over the next three years, and policymakers are following through on meeting key IMF conditions.

“In other areas of fixed income, if we do enter a rate-cutting cycle in the US, you also want to build some duration into your portfolio, maybe through Treasury Inflation-Protected Securities (TIPS),” she said.

There is still the concern that inflation could remain a bit stickier.

But the Federal Reserve has the room to begin the cutting cycle, even if the data points are coming in a little hot.

For the 40% in equities, Andrea said that international equities would be one of her larger allocations for when that rest-of-world growth comes back in favor.

“A caveat is that I think it’s early for China,” she added.

India continues to be a favorite exposure. But in general, “you want a pretty diversified basket that looks across Europe, frontier Africa, South Africa and maybe Asia ex-China at this point.”

“I’d put the rest into small- and mid-caps in the US, tilted more toward growth for now,” Andrea added.

On the whole, she said she’d skew away from the US exceptionalism trade.

“When we think about growth cycles in general, we’ve seen the ability of emerging markets to perform quite well without China, so it gives us some optimism about rest-of-world growth,” the portfolio manager noted.

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