What were the major recent events and impacts on your asset class?
The most important events came from the central banks: how are they reacting to the sharp rise in inflation rates, and for how long do they actually want their new interest rate policy to last? Over time, as a result, opportunities arise on the bond markets. This is why we used this opportunity to build up positions and increase the quota.
What can your asset class offer in the current environment?
The investment strategy currently offers a very attractive risk/return profile, what I haven't seen in a very long time. This is also due to the fact that stocks as well as bonds are attractively rated. This offers allocation opportunities, which we used.
What is your outlook in the near and medium term?
The short-term outlook is certainly somewhat clouded due to the prevailing crises in the world, and here recently in focus was certainly the war in the Middle East. You can not yet analyse what kind of lasting impact does it have on economic development and or even on corporate profit development. In the medium term, however, we are actually very positive on the capital markets. Because, asset classes such as stocks and bonds have good return potential. There are also always innovations and/or new technologies, which actually lead to increasing productivity among companies. I name here just artificial intelligence briefly. In addition, important for the Swiss market is the attractiveness of the Swiss real estate market. Here we can actually say that after the correction, the attractiveness has risen and underlying trends favour this asset class.
Andrea Quapp highlights the fact both stocks and bonds are currently attractively rated, which is presenting her with asset allocation opportunities. She also mentions the importance of innovations such as artificial intelligence and, specifically for Switzerland, the appeal of the Swiss real estate market.
Christian Munafo of Liberty Street Advisors notes an improvement in market conditions for investors in late-stage private companies; many of these companies are similar to what public market investors used to seek in small to mid-cap growth stocks. He also stresses that many of them are not just high growth, they are also at or approaching profitability.
Goro Takahashi describes the key factors that influenced the Japanese market over the third quarter, particularly the main stock exchange’s ongoing initiative to improve listed companies’ financial indicators, and the areas he thinks investors should focus on into the turn of the year.
Julian Howard reflects on the combination of stretched valuation and a tight equity risk premium that has made equities less attractive in the short term. However, it does not undermine the very long-term case for equities, in his view. He also notes the long-term structural case for China.
GAM Systematic’s Dr Chris Longworth and Guglielmo Mazzola highlight bond sell offs and a commodities rally as significant market events, and note that systematic investment approaches can help provide investors with much-needed diversification for their portfolios.
Atlanti’s Gregoire Mivelaz highlights the three major events of Q3 that impacted his investment universe: earnings, bond call dates and the reopening of primary markets. He believes given we are now in a late credit cycle, credit quality matters for investors. And he notes that market mispricing is continuing to lead to opportunities.
Jian Shi Cortesi notes that weak sentiment in China is keeping Chinese equities at very low valuations, due to the soft economic growth, real estate drag and the ongoing China-US rivalry. However, she is optimistic about long-term prospects, with the conviction that in the long term earnings growth will drive stock prices.
Niall Gallagher shares his views on the implications of rising real bond yields and why he thinks central banks will continue to have to fight inflation rather than deflation. Niall also discusses the sheer scale of capital required to enable the energy transition, and some of the companies he believes stand to capitalise.
Andrea Quapp, Investment Director for Multi Asset Class Solutions (MACS) Continental Europe, advises investors to look through the impact of a flood of negative news flow, including the tragic events in the Middle East and Ukraine. While people are understandably unsettled, she believes they are also overestimating the impact on the macroeconomy.
GAM Investments’ Andrea Quapp believes the current environment is favourable for risk assets as the situation is better than the mood. She explains why, despite the challenges still facing financial markets and geopolitics, fleeing into government bonds may not be a good idea at the moment.