At GAM Investments’ latest Equities Meeting, held on 16 March, two of our managers shared their thoughts on stock market volatility and value versus growth.
Tim Love – Emerging Market Equities
At the turn of the year we had anticipated increased levels of equity market volatility due to higher real rates; this is currently playing out across styles and sectors. In such an environment, portfolio risk management is key. At the same time, we believe it will be important to ride the volatility and exploit inevitable pullbacks. Overall, we still expect an upwards climb for equities in 2021 and believe emerging market (EM) equities in particular will be helped by a search for yield in all its forms: earnings yield, dividends and positive carry, especially on stocks that also combine investment grade, liquidity and strong environmental, social and governance (ESG) credentials. We also note that domestic drivers are gathering pace across EMs, including India’s infrastructure programme, China’s new five-year plan, as well as continuing reforms in Brazil and Saudi Arabia.
Ernst Glanzmann – Japanese Equities
Year-to-date, the Topix Growth Index has climbed by circa 3%, while the Topix Value Index is up by approximately 17%. Trailing 12-month data illustrates how value stocks have been catching up with growth names; this is a major, well-advanced tactical shift. We are approaching reporting season in Japan; a critical point at which investors will dig into numbers to confirm whether growth stocks are likely to maintain their profit pace, or if value stocks will confirm or overshoot the envisaged turnaround. Mining, shipping, steel, banks and airlines are among the sectors to outperform of late, although it is unknown if these industries will see sustainable profit patterns going forward.
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 of current or future trends. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice. Reference to a security is not a recommendation to buy or sell that security. The securities listed were selected from the universe of securities covered by the portfolio managers to assist the reader in better understanding the themes presented. The securities included are not necessarily held by any portfolio or represent any recommendations by the portfolio managers.