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21st Century Business Herald reporter Li Yuchen reports from BeijingWhy invest globally? Is now a good time to invest globally?

After deciding to invest globally, what investment opportunities should you focus on? In global investment, what risks deserve special attention?

Regarding the four topics that investors are most concerned about when facing overseas investment issues, Yang Lianling, fund manager of Tianhong International Business Department, gave answers at the "Tianhong Fund Overseas Investment Mid-Year Strategy Conference" held recently.

Why invest globally? Yang Lianling believes that global investment can not only effectively diversify the risks of a single market, but also has the potential to increase the return potential of the overall investment portfolio. On the one hand, the A-share market has a low correlation with the trends of the United States, Japan, Vietnam and other markets, and global investment is expected to reduce the impact of single market fluctuations for investors. On the other hand, if the right investment title is chosen, overseas investment is expected to increase investors' investment returns. Taking the S&P 500 index as an example, the index has an annualized return of more than 10% in the past 15 years, and has low volatility, showing a high Sharpe ratio. (Data source: Bloomberg, time period 2009-2023)

Is it a good time to invest globally? In answering this question, Yang Lianling focused on analyzing the investment opportunities in the U.S. stock market.

When analyzing whether there is a risk of a sharp decline in the current US stock market, Yang Lianling proposed three key factors: monetary policy tightening, US economic recession, and financial risks. By reviewing historical data, she found that in the past 70 years, it was rare for the S&P 500 index to experience a sharp decline of more than 15%, and each decline had its own specific reasons. At present, the market generally expects that the US economy will achieve a soft landing and the Federal Reserve will enter a cycle of interest rate cuts, which to a certain extent avoids the risks of monetary policy tightening and economic recession.

In addition, Yang Lianling also pointed out that after the epidemic, the US government's active fiscal policy has effectively repaired the balance sheet and enhanced the resilience of the economy by injecting funds into residents and enterprises. The leverage ratio of US residents has returned to the level at the beginning of 2020, showing a healthy economic state. Coupled with the stability of the job market and the mild downward trend of inflation, the consumption capacity of US residents has been guaranteed. These factors have jointly supported the stable growth of the US economy and reduced the risk of economic recession.

Yang Lianling predicts that the United States will enter a cycle of interest rate cuts in the next two to three years. This policy shift will create a more relaxed environment for the financial market and be conducive to the performance of risky assets.

Based on the above analysis, Yang Lianling believes that now may be a good time to invest in overseas markets. She also pointed out that although market fluctuations are difficult to predict in the short term, historical data shows that in the long run, the probability of loss of holding US stocks decreases significantly as the holding time increases. Statistics simulated by Bank of America based on historical data show that if investors hold the S&P 500 for more than one year, the probability of loss is less than one-third; if held for more than ten years, the probability of loss is reduced to 5%. This data provides confidence for long-term investors. (Statistical time: 1929-20240611)

At this point in time, which investment opportunities are worth paying attention to?

In the short term, Yang Lianling believes that as the first rate cut by the Federal Reserve approaches, the market is enthusiastic about rate cut trading. Historically, gold and US bonds have often outperformed other assets before rate cuts. After rate cuts are implemented, US stocks and the US dollar usually perform strongly. Therefore, investors can consider gold and US bonds as short-term investment tools when the first rate cut occurs, and turn to US stocks and the US dollar after the rate cut.

In the long run, Yang Lianling is optimistic about the investment theme related to artificial intelligence.

Yang Lianling pointed out that in the long run, the development of artificial intelligence technology has become an investment theme that cannot be ignored. Although the hardware landing in the field of AI has received attention in the past year, the real explosive growth may come from the widespread application and popularization of AI technology. Investors should pay attention to companies and applications that can promote the popularization of AI technology and make it accessible and accepted by people around the world.

Yang Lianling also stressed that despite the trend of deglobalization and political conservatism, the dawn of the technological revolution has provided new impetus for economic growth. The continuous maturity and application of AI technology is expected to promote a new round of technological revolution and bring new opportunities to investors.

"When looking at overseas investments, we cannot ignore potential risks. Although the U.S. stock index has been bullish in the long term, there have been decade-long stagnation periods in history, which are often associated with major socio-economic events, such as World War II, the stagflation era, and the bursting of balance sheet bubbles. These historical lessons remind us that investment decisions need to consider the context of the times and macroeconomic trends. At present, the risks we face can be divided into two categories: "gray rhinos" and "black swans." "Gray rhinos" refer to foreseeable but often overlooked risks, such as the global trend of de-globalization and political conservatism, which may end the downward inflation dividend of the past few decades and lead to stagflation. "Black swans" are unpredictable emergencies, such as large-scale conflicts that may be triggered by global turmoil, which may have a major impact on investment." He said.