09 October 2020
At GAM Investments’ Weekly Equities Meeting held on 6 October, three of our managers shared their views on current market conditions.
Gianmarco Mondani – Developed Europe Long / Short Equity
Company earnings across the board have generally surprised to the upside, especially when compared to savage cuts estimated by many analysts. The vast majority of businesses are posting better than expected results. While we are seeing improving economic indicators, Covid-19 lockdowns, Brexit and the US election could still impair an economic recovery in the short term. As a result, it is difficult to make top-down calls. Instead, we are focused on singe stocks and see long opportunities in tech, healthcare and services on the long side for example. Other areas, such as office real estate, catering, and industries exposed to post Covid-19 capex cuts present opportunities on the short side.
Niall Gallagher – European Equities
We remain relatively constructive heading into Q4. Positive and consistent messages from European corporates suggest that economic growth has continued on a selective ‘V’ shaped recovery path with growth in Asia strongest on a geographic basis and clear sector divergences. Consumer cash balances have expanded significantly during the crisis as a result of furlough schemes and other fiscal measures, particularly in the US, UK and Europe; at the same time, spending in some areas (holidays, experiences) has been limited. Therefore, once the virus recedes, we may see a further recovery in consumer spending. On the industrials side, companies are indicating continuing strength in Chinese residential construction and we expect a pickup in European industrial activity, helped by fiscal expenditure geared towards green initiatives.
Reiko Mito – Japanese Equities
In Japan, Yoshihide Suga, the new prime minister, appears to have made a positive start. Early signs suggest the country’s "Go To Travel" campaign, which aims to promote domestic tourism, is proving successful. Some market commentators had argued that foreign affairs were a weak point for Suga; however, a meeting with US Secretary of State Mike Pompeo has silenced some critics. Overall, economic indicators point to an upward trend, except for some sectors, such as travel. Daily Covid-19 cases in Japan are circa 500 at present, a low amount for a country with a population of 126 million. As for the upcoming US election, while a Biden win would be marginally negative for some sectors following potential corporate tax hikes for the subsidiaries in the US, his energy policy would be positive for machinery companies in Japan, many of which are focused on energy efficiency.
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. Past performance is no indicator for the current or future development. The companies listed were selected from the universe of companies covered by the portfolio managers to assist the reader in better understanding the themes presented. The companies included are not necessarily held by any portfolio or represent any recommendations by the portfolio managers. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice.