Higher quality and defensive stocks due to stage recovery

Sentiment and certain macroeconomic data have recently improved and the risk of a prolonged global recession has eased.

However, growth is likely to be at a much lower rate than before, particularly in developed economies, despite loose fiscal policies. Investment opportunities are still available but may be harder to find. The equity markets’ rally in Q2 2009 helped cyclical stocks, such as basic materials, many of which had low earnings growth and dividend potential and high debt. We believe that higher quality stocks, with strong balance sheets and cash-generating ability, are due for a recovery, as well as certain defensive sectors such as utilities and healthcare. In developed markets, second-quar...