In the first three months of 2016, global equity markets made a rollercoaster ride as investors started the year fretting about the impact of China’s economic slowdown. But China’s government was quick to reassure them with a round of fresh stimulus.
Since then, sterling and oil have been the only two asset classes to excite investors, but that has been for idiosyncratic reasons. Oil has almost doubled in price since January, which has had more to do with decreased output and increased demand from motorists, especially in the US, than with higher economic activity. The weakness of sterling, for its part, is directly related to the upcoming Brexit referendum.
The possible consequences of the UK vote on EU membership, in connection with some important upcoming elections in Europe in the next year, are currently overshadowing the nascent recovery in Europe, as the eurozone economy grew by a healthy 1.8% in the first quarter of 2016. NN Investment Partners, the Dutch asset manager, looked at data from Thomson Reuters, only to notice that economists’ expectations about developed markets data vary more than at any time in the last two years, says Valentijn van Nieuwenhuijzen, its head of multi-asset.
Considering valuations in developed market equities are lofty, a rather strong conviction is indeed needed for investors to increase their allocation to this asset class. As the erratic macroeconomic signals of recent months haven’t provided this, José Luís Borges, head of institutional portfolios at BPI Gestao de Activos in Lisbon, hasn’t touched his portfolios for an unusually long time.
“We usually tend to make some changes at least every other month, but we haven’t done anything for at least three or four months now,” he says.
“We usually tend to make some changes at least every other month, but we haven’t done anything for at least three or four months now” - José Luís Borges