Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

What's haunting these 17 investment pros this Halloween?

Gather round our campfire this Halloween for some frightening investment forecasts – as well as a few tales with happy endings

It's that time of year again. The nights are getting longer, there's a chill in the air and the markets are growing ever more jittery.

Gather round our campfire this Halloween for some frightening investment forecasts, as well as a few tales with happy endings.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

It's that time of year again. The nights are getting longer, there's a chill in the air and the markets are growing ever more jittery.

Gather round our campfire this Halloween for some frightening investment forecasts, as well as a few tales with happy endings.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Brad Tank

Chief investment officer, Neuberger Berman

Looming recession

As the current economic expansion in the US extends into its 10th year, interest in pinpointing its end date continues to grow.

Given the traditional levers of economic recovery have yet to return to pre-crisis norms, we expect the coming recession and subsequent recovery period will be U-shaped – a slowdown followed by persistently sluggish economic activity, leading to an extended period of downgrades and defaults among highly-leveraged corporate issuers.

Though the fiscal stimulus enacted earlier this year has increased the probability the US cycle will soldier on for at least a few more quarters, a variety of indicators suggest the end is likely not too far beyond that.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Oliver Dobbs

Chief investment officer, Credere Capital

Machine algorithms

Across the globe’s trading floors, traders have given way to algorithms. While this is certainly driving necessary innovation, we, as an industry, are also losing something vital in delivering alpha – the human component.

Without this, there is no insight and judgement, which could have calamitous consequences. My belief is the next time we get a volatility event, it will be a lot worse than the recent spike because there will be no one to step in on the other side of the trade.

These disruptive trends are rapidly creating the potential for steeper sell-offs but also arbitrage opportunities. In the current environment, relative-value arbitrage strategies are a true uncorrelated solution offering both stable returns and reduced volatility.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Haig Bathgate

Head of portfolio management, Seven Investment Management 

Faang fears

It is interesting to see the recent sell offs starting to affect tech stocks. When and if we see another global financial unravelling, there is always a bogeyman.  In 2008, the bogeyman was the banks. This time, my personal opinion is that it could be the Faang [Facebook, Amazon, Apple, Netflix & Google] type stocks, that have helped bleed the life out of the high street.

Debenhams is the most recent casualty of an ever growing list as it seeks to close up to 50 stores, as high streets start to resemble more and more a ghost town.

Governments might not be prepared to drive a stake through the heart of Faangs, but I would not be at all surprised to see some form of comeuppance in the form of social redistribution taxes.

The most hair raising risk, in our view, is the issues facing cautious investors - fixed income represents the biggest risks to capital.  Interest rate increases haven’t finished, and so bonds are still exposed, and since they take up a hefty proportion of cautious investors portfolios, we worry that many cautious investors are more exposed to risk than they had bargained for.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Rogier Quirijns

Portfolio manager, Cohen & Steers European Real Estate Securities fund

Jeremy Corbyn

If the UK was to experience a ‘hard’ Brexit, this will more than likely increase the chances of Jeremy Corbyn coming into power. This would be a double-whammy for investors. A Corbyn administration’s impact on the UK property market could even be more damaging than the fallout from Brexit.

Corbyn’s long-held agenda is not business friendly, which could increase the risk within the office property space. Higher taxes would also hit consumers hard and, by extension, the retail property market.

One of Corbyn’s first targets would likely be high-end London houses. In a bid to try increase availability of affordable homes in the capital, a Corbyn-led government would likely curb foreign property ownership – which would have a detrimental impact on prices across the board.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Bill Dinning

Head of investment strategy and communications, Waverton IM

Tariff revenues as a % of US Federal Tax

The chart above shows tariff revenues as a percentage of US Federal tax revenues back to the 18th century. We estimate the tariffs imposed by President Trump will take tariffs to over 4% of revenues from the 1% they have consistently been since 1945.

On one level, the increase in tariffs harks back to a grand tradition of American tax policy. When Alexander Hamilton, the first Treasury Secretary, took office he used them to fund the nascent Federal Government. The Tariff Act of 1789 was the first piece of substantive legislation passed by the first Congress.

But in the 21st century this chart is a little scary. The largest and most open economy in the world using taxes to discourage the buying of imports is an attack on free trade and could end up hurting global growth and raising US inflation, which could in turn mean higher interest rates.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Jacob Mitchell

Chief investment officer, Antipodes Partners

Yield chase

The extreme thirst for yield has pushed the US high yield corporate debt cycle into uncharted territory, with the stock of debt outstanding and the average leverage ratio high relative to the current ‘Goldilocks’ combination of low base rates, tight credit spreads and high profit margins. The cycle is approaching the shakeout phase.

We have short positions in equities benefitting from the high yield debt boom – including over-hyped thematic ‘disruptors’, the low-volatility bond proxies favoured by passive strategies, as well as companies that have applied extreme leverage to fund M&A and buybacks.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Thomas Sørensen (pictured) & Henning Padberg

Portfolio managers, Nordea 1 – Global Climate and Environment Equity fund

Climate change

On a global scale, 2018 is shaping up to be the fourth-hottest year on record. We cannot consider this just a hot year. This is a trend. The planet is getting hotter and will become even hotter in years to come.

This will not only cause problems relating to higher temperatures but cause other extreme weather-related events. Scientists are even predicting winters will also be more severe, so it is not just about warming, but climate change.

The economic incentive, where it makes economic sense for both consumers and corporates to invest in climate solutions, has clearly reached an inflection point. Companies understand improving sustainability is vital to remaining competitive in today’s world.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Jeremy Lang

Partner and co-founder, Ardevora Asset Management

Inflation pressures

A livelier US consumer and near full employment should put upward pressure on wages. Once wage pressure gets entrenched, inflation usually follows. We have not seen inflation for quite a while and we have not seen accelerating inflation for a long time.

There have been price jumps since 2009, but this time it feels different. We look at a lot of stocks and have noticed more excuses from managers about cost pressures in more places than before. There seems to be a convergence of previously isolated pockets of cost pressure.

Businesses used to be able to navigate around narrow sources of cost pressure but now there is more layering, or compounding of pressure.

The signs are still tentative, but we have noticed more businesses stutter on profit margins – businesses that previously found it easy to push margins up by holding prices and cutting costs.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Fabrizio Quirighetti

Co-head of multi-asset, SYZ Asset Management

Unbalanced China

China is big, with its GDP more than doubling over the last ten years, from $5 trillion to $12 trillion. As a result, it now has a much larger impact on the global economy, with the US no longer the main engine.

While the Chinese government has recently engaged in a balancing act, trying to eliminate shadow banking and shifting from an export-oriented to a consumer-led economy, it now has to deal with the trade war, rising US rates and an overall slowing economy – with the 6.5% GDP growth print in Q3 the slowest since 2009.

It cannot cut rates anymore without exacerbating downward pressure on the yuan, nor can it rely on a large stimulus package, which would likely worsen the debt hangover. In other words, China has less room for manoeuvre.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Arif Husain 

Portfolio manager, T. Rowe Price Dynamic Global Bond fund

Dollar headwinds

I am negative on the US dollar at present, on the belief it faces some major headwinds. Right now, we are probably at peak US growth relative to the rest of the world and the gap is going to narrow.

While the midterm elections probably will not have much immediate impact, it could provide a window to the presidential election in two years. Should we get a sense the ‘Trump premium’ may disappear, it will be negative for the dollar.

Finally, the US has a huge budget deficit and it is going to grow – which will also be negative for the dollar. However, if the dollar remains strong, it will be difficult for emerging market currencies to perform and therefore difficult for emerging equities and debt to perform.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Robert Horrocks

Chief investment officer, Matthews Asia

Chinese Zombie Companies

China’s corporate Zombies - decaying companies, the undead of the business world, stumbling around and feeding on our brains. As the government pours money into these lifeless corporate bodies, it prevents capital flowing to the healthy, vibrant private businesses struggling for survival.

Or so the horror movie goes. The truth is more nuanced: many of these zombie companies exist to allow unskilled workers in dying industries to gracefully exit the workforce or find new employment whilst drawing a salary.

Though they feed off the brains of the private economy, they are zombies with a heart. And the private economy is not running for cover – private enterprise is responsible for 86% of urban employment and all net new job creation. No, in the real-life story, the zombies will eventually be extinct and the private sector will flourish.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Oliver Stone

Group head of research and portfolio Manager, Fairstone

Disparity between ‘growth’ and ‘value’ in US equities

For more than a decade US growth stocks have outperformed value stocks in one of the largest visible divergences going back to the 1920s. The performance differential totals around 133% over 10 years and is an outlier in a strongly mean-reverting series.

However, given a now rising rate environment in the US, coupled with seemingly entrenched, broad based economic growth, the outlook for value investing should be improving, and the colossal flow of investor capital into ‘glamour’ growth stocks at the expense of value is concerning.

Value investing in US equities is very much a contrarian profession, and one that has not been well rewarded of late. Whilst timing markets is often fool’s errand, it feels prudent to diversify portfolios with the complementary styles of value and growth.

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Esmé van Herwijnen

Responsible investment analyst, EdenTree Investment Management

Plastic waste

The world generates about 3.5 million tonnes of solid waste a day.

The scale of the problem is huge and plastic pollution in particular has become a serious threat to the oceans and marine biology, as well as our soil, drinking water and human health. By 2050, there will be more plastic in the ocean than there will be fish.

Businesses are working together to find a solution to the plastic waste problem. In the UK, over 40 companies and organisations came together for the UK Plastic Pact.

For investors, there are many opportunities to invest in companies that provide solutions to the waste problem or have adopted a circular approach to their business models. These are likely to benefit from the need to use resources more efficiently and to divert economically valuable waste streams.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Mark Appleton

Global head of multi-asset strategy, Ashburton Investments

Wage pressures

US president Donald Trump’s corporate tax cuts and the widening deficit which ensued as a result, as well as the Federal Reserve’s quantitative tightening programme, are increasing the supply of treasuries in the market.

This ‘perfect storm’ has pushed up the 10-year treasury yield to levels not seen since 2011, sparking concerns for risk assets.

The Fed is also forecasting more rate hikes than the market anticipates. We are not yet concerned about inflation further impacting bond prices, but we have our eye on wage pressures. The U6 ‘true unemployment rate’, which incorporates people working part-time because full-time work is unavailable, is still relatively high at 7.6% – versus 3.7% for the U3 standard measure.

We are keeping a close eye on the U6 number, as wage pressures could build if we see the rate decline. This would then inflict pain on bond yields and have negative implications for global risk assets. At this stage however, we do not see bond yields rising significantly from current levels.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Calum Bruce

Manager, Ediston Property Investment Company

Brexit uncertainty

Regardless of whether it is a hard Brexit or not, the UK property market will be impacted in some way. There is no consensus view as to what will happen, but it is likely there will be a pause and more subdued property market activity. 

This is what occurred immediately after the EU referendum in 2016, when investors and tenants alike considered the uncertainties of Brexit. It was exacerbated by the liquidity problems faced by daily dealt open-ended real estate vehicles.

Many of these were forced to close to manage redemptions and sell assets, in order to increase cash levels. A similar outcome to this would not be helpful for the property market as a whole. 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Noelle Cazalis

Assistant fund manager, Rathbone Strategic Bond fund

Is US high yield worth the risk?

Despite higher nominal yields, US high yield is still overvalued on a spread basis. Are investors being compensated for the risks?

This is something that worries us as we move towards the back end of the credit cycle. Additionally, from 2020, $1 trillion a year will need to be refinanced and the US BBB universe has grown by 160% since 2010.

What happens when we hit a downgrade cycle? Refinancing needs and potential downgrades can put pressure on supply in the high yield market – can it be a catalyst for a significant repricing?

As a result of this we are currently underweight high yield in the Rathbone Strategic Bond fund.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Steve Magill

Head of European Value, UBS Asset Management

Don't be afraid of value

Some investors have been tricked into believing that value doesn't work...but actually there are treats in store for patient long term investors willing to question market consensus.

It sounds frightening, but since the onset of the global financial crisis value stocks have underperformed the UK equity market. Why? Low interest rates and ongoing uncertainty have driven investors towards bond-like equities.

Have they been tricked into buying these at high valuations? Is there a treat for contrarian, long-term investors willing to buy value stocks at low prices? It seems spooky but historically rising interest rates have coincided with periods of strong outperformance for value stocks.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Related Fund Managers

Arif Husain
Arif Husain
51/55 in Bonds - Global Flexible (Performance over 3 years) Average Total Return: -1.67%
Fabrizio Quirighetti
Fabrizio Quirighetti
14/25 in Mixed Assets - Absolute Return EUR (Performance over 3 years) Average Total Return: 12.58%
Haig Bathgate
Haig Bathgate
18/75 in Mixed Assets - Conservative GBP (Performance over 3 years) Average Total Return: 16.04%
Jacob Mitchell
Jacob Mitchell
552/650 in Equity - Global (Performance over 1 year) Average Total Return: 1.41%
Jeremy Lang
Jeremy Lang
64/91 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 15.0%
Henning Padberg
Henning Padberg
7/38 in Equity - Global Themes (Performance over 3 years) Average Total Return: 55.91%
Thomas Sørensen
Thomas Sørensen
6/38 in Equity - Global Themes (Performance over 3 years) Average Total Return: 55.91%
Robert Horrocks
Robert Horrocks
15/150 in Equity - Asia Pacific Excluding Japan (Performance over 3 years) Average Total Return: 63.07%
Rogier Quirijns
Rogier Quirijns
Citywire TV
Play How Kames Property Income got Brexit-ready

How Kames Property Income got Brexit-ready

Kames Property Income co-manager Richard Peacock says the fund is positioned to withstand the widely anticipated Brexit redemption stampeded.

Play Citywire 20: John Dodd's great Artemis expedition

Citywire 20: John Dodd's great Artemis expedition

Citywire executive chair Lawrence Lever sat down with Artemis founder partner John Dodd.

Play Citywire 20: Investec's du Toit on managing the 'jerk factor'

Citywire 20: Investec's du Toit on managing the 'jerk factor'

Investec boss Hendrik du Toit believes he has become far more decisive over the last 20 years, especially when it comes to managing 'jerk' factor.

Read More
Your Business: Cover Star Club

Profile: Altor's Towry graduates on launching a family business

Profile: Altor's Towry graduates on launching a family business

Altor Wealth Management was launched on of a shared vision to form a family-style company that would charge fairly and differently.

Wealth Manager on Twitter