31 October 2019
We asked a group of our portfolio managers a series of questions about their respective asset classes. This second video, in a series of three, looks at the overall market environment.
Rob Mumford on Chinese and Asian equities
We feel that the real overhang for emerging markets, China and Asia has been fear about growth and the strength of the US dollar. It is our opinion that the growth element has been the biggest detractor. Many emerging markets can be susceptible to trade, exports and strategic trade wars. There have been domestic elements and domestic policies that offset this to a degree. This is especially evident in China, which has employed counter-cyclical measures to offset cyclical weakness. We have seen more aggressive monetary action and aggressive fiscal stimulus accelerate in the past few months. Market by market, there have also been industry-specific stimulus measures adopted. Ultimately, the key events have been the reaction to the slowing growth and how each company is positioned for that. As investors, we hope to be best positioned within the market to benefit from those themes.
Adrian Owens on global rates
There have been many market-moving events, such as in Mexico, where we can see some of the highest real interest rates in the world. The Scandinavian region, at this point, is standing out as one of the few regions in the world where central banks are going against the trend and raising interest rates.
Niall Gallagher on European Equities
The last year or so has been dominated by a slowdown in industrial production in Germany. We feel that this is a function of two things. First, we had slower sales of cars in China, which is an extremely important car market. Second, we have seen a slowing in global trade as a result of the US-China trade war. This has impacted confidence (and therefore investment), in addition to affecting the overall eurozone data. Otherwise, we feel that things have been largely positive; services have been more robust, manufacturing consumption has been strong, unemployment has been falling and wage growth has been rising. The key piece of data remains the weakness in German industrial production. Brexit, meanwhile, has been impacting the UK and Ireland. Even more so, it has impacted investment due to its related uncertainties, with companies reducing investment in the UK as a result of concerns over the future. The trade relationship between the US and China remains a key influence on global markets.
Anthony Lawler on alternative risk premia
One of the risks of alternative risk premia (ARP) strategies is that of sudden sharp reversals in markets, which is similar to discretionary approaches. That said, we feel most other environments are safe for ARP. There is no concentration of risk in one specific form; it is highly diversified. If markets are behaving erratically, we are by and large not very sensitive to that.
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Reference to a security is not a recommendation to buy or sell that security. Past performance is no indicator for the current or future development.
