The bank said while equities are in the relatively late stage of their cycle, they are still worth investing in - given the right diversification and selection. It is broadly positive about risk assets this year.

Take some risk to earn returns but also diversify - that’s the message for investors this year from BNP Paribas Wealth Management in an outlook that retain an optimistic tone.

While the geopolitical news and media headlines are full of disconcerting noise, the Paris-listed bank argues that it thinks political risks will decline this year and that underlying economic forces will propel returns as they usually do.

“Profits continue to rise, albeit more slowly, especially in the US; interest rates are historically very low as inflation remains timid and stock markets are not too expensive,” Florent Bronès, chief investment officer at BNP Paribas Wealth Management, said. 

With €377 billion ($431.8 billion) of assets under management, BNP Paribas wields a big stick in the investment market. 

Last year’s drop in global equity markets has actually created opportunities for investors, if they are selective, to re-enter the fray at a more affordable level, Bronès said.

“At the moment valuation [on US equities] is relatively benign,” he told journalists in a briefing on the bank’s investment outlook. 

“US equity valuations are reasonable….we cannot say the market is cheap but it isn’t really expensive any more,” he said. 

Central banks such as the US Federal Reserve will continue to take monetary policy back to more “normal” circumstances, taking some of the liquidity injected into the global economy over the past decade. This will make markets more choppy, making it important to hold more defensive assets, Bronès said.

With the equity market uplift since 2009 seeming to be near its end, investors should go for quality assets, such as securities of firms with high profits and low debt. 

“In the eurozone, companies that generate high and sustainable dividends also offer a good opportunity for quality investments. In addition, we recommend US and Asian corporate bonds with high credit ratings and short durations,” he said. 

Turning to Asia, the bank said that there has been a case for tapping into sectors that benefit from the outsourcing of manufacturing by China across the region, a process likely to be boosted by US-China protectionism issues over trend.

Within equities overall, the bank identified the following themes as generating investment ideas: Transportation (low-pollution, efficient transit systems in cities, for example); cyber-security and use of blockchain technology to improve security; efficient water use and waste management; health, wellbeing and managing expanding human lifespans; artificial intelligence and industrial innovation in the new era.