Where the crowd is not

Joe Little, Global Chief Strategist at HSBC Asset Management, highlights an important contrast within today’s markets: while some segments display increasingly speculative characteristics, others remain largely neglected.

These markets combine limited investor interest, relatively modest valuations and greater potential sensitivity to future interest-rate cuts. Because they are less crowded—and carry fewer excessive expectations—they may also prove more resilient should the current market leaders come under pressure.

Europe continues to trade at a substantial valuation discount to the US. Parts of Asia also deserve attention, particularly the two “sleeping giants”: China because of its exceptionally wide valuation discount, and India because of its long-term structural growth potential, although its market is no longer particularly cheap.

Being ignored is not an investment thesis in itself. But when reasonable valuations meet improving fundamentals, neglect can become an opportunity.