Contrary to much of the rhetoric, investors can still find plenty of upside in stocks if they look hard enough, according to T. Rowe Price association portfolio manager, Hari Balkrishna.

Even looking at the US share market, which is currently the most expensive in the world and above its long-term average price-to-earnings multiple, "it is still within the realms of what I would say is reasonable," says Balkrishna.

"I'm not standing here saying markets are cheap and we should be loading up the truck, what I'm saying is markets, for all the rhetoric out there, in my view, remain within the realm of reasonableness.

"As long as you're thoughtful in how you go about stock-picking, I think you can still generate meaningful upside in an absolute and relative sense, even from here."

From a macro-economic perspective, he refers to the upward pressure on interest rates, particularly the Federal Reserve's recent rate hike.

"Inflation has picked up some, I'd argue largely driven by the increase in oil prices, but it still stays pretty subdued for this point in the cycle.

"So, when you think about the bookends of inflation, they were much higher in the past - we're debating about whether inflation is going to be 1 or 1.5 or 3 per cent, so when you think about a structural outlook for inflation, our view is still that inflation stays pretty subdued," Balkrishna says.

Looking at equity markets in emerging regions alongside the MSCI World, he says they are both in line with their 20-year averages.

Growth versus value

For some time, there has been debate about whether the long run of success enjoyed by growth-oriented companies will continue, and whether investors should instead begin over-weighting portfolios to value.

"I would actually argue…in looking at disruption and technology, that this cycle can probably go on for a little longer than we think, structurally. And the reason for that is when we think about the power of disruption that's hitting the market from a range of industries…the true big growers in the market are growing almost regardless of the macro.

"In an otherwise low GDP growth / low inflation world, the scarcity of growth is pretty acute, and so we're willing to pay a multiple for that, and I'd argue that multiple isn't even that egregious," Balkrishna says.

In highlighting the effect technology and innovation are having on businesses across markets and sectors, he points to automation and his experience of numerous visits to the Japan-based factory of a client.

"With literally not a single human being on the factory floor, that for me is the future, that is where we're going."

What it means for investing

"I think it's really important for us to search for stocks on the right side of change," Balkrishna says.

"In spite of the advent of things like passive investing and ETFs, I think it's really important to understand that betting on the things that are going to be on the right side of change will be extremely powerful. And in my view, those stocks probably continue to perform, because the trend is so powerful and so secular…it isn't cyclical."

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Glenn Freeman is a senior editor at Morningstar.

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