{"id":59131,"date":"2016-12-12T02:15:00","date_gmt":"2016-12-12T01:15:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/strategie\/why-the-value-shift-favours-europe\/"},"modified":"2016-12-12T02:15:00","modified_gmt":"2016-12-12T01:15:00","slug":"why-the-value-shift-favours-europe","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/strategie\/why-the-value-shift-favours-europe\/","title":{"rendered":"Why the \u2018value\u2019 shift favours Europe"},"content":{"rendered":"

What lessons have you learned from 2016?<\/strong><\/p>\n

Markets are one long enduring learning curve. If a fund manager thinks they have nothing left to learn, then they\u2019re finished, because the market loves to humble. And I think 2016 has been a humbling year for a lot of managers. One or two of our peer group have said exactly the same, that this has been the toughest year I have known. One of the factors that has made it so tough has been the rotation \u2013 it\u2019s been a traders\u2019 market. The rotation has been violent because of positioning. The big lesson I learned in 2016 is \u2018maybe you didn\u2019t look at positioning enough\u2019. First we had the rally in energy, then mining; two areas that many people had found easy to avoid for a number of years. And more recently in the US we had \u2018the big one\u2019, and thankfully this we did manage to be on the right side of. It\u2019s unusual for us to like the banking sector, but we managed to pre-position for that. And that was through applying the lesson we learned about positioning.<\/p>\n

What are the key themes likely to shape the markets in which you invest in 2017?<\/strong><\/p>\n

I think the key influences going into 2017 will be whether we\u2019re right on equities moving from a growth to value market on a global basis. It\u2019s been a one-way growth market since the financial crisis \u2013 you haven\u2019t wanted to be in value. I\u2019m not a great fan of those labels (growth versus value), as these things are in the eye of the beholder. But I do think that we are running out of road on quantitative easing \u2013 central bankers know this \u2013 and that will shape markets. I therefore believe we have touched the lows on bond yields globally, and the valuation high water mark for bond proxies \u2013 stocks that have been \u2018oh-so-comfortable\u2019 to be in. In October and November it became very uncomfortable to be in those stocks, and I think this is a move that has only just begun. To be right on that, I\u2019ve got to be right on one thing; that deflation doesn\u2019t win, and that therefore bond yields have got further to go up (or certainly not going down). If deflation wins, and bond yields go further down, that view is wrong, you don\u2019t want to be in value, you want to be in so-called \u2018quality growth\u2019. I believe that view is not wrong and you don\u2019t want to be in quality growth. That\u2019s been the last decade, I don\u2019t think it\u2019s the next decade. <\/p>\n

What are your highest conviction positions moving towards the new year?<\/strong><\/p>\n

I think if you have \u2018high conviction\u2019 at the end of 2016 you\u2019re a strange person, or you\u2019ve got a stronger constitution than I have. I\u2019ve always said, be aware of the fund manager who\u2019s got high conviction on everything at all times \u2013 that\u2019s quite a dangerous beast in my view. A dose of humility and neurosis is always welcome.<\/p>\n

So, I go into 2017 shaken by some of the events of 2016. But where I do have conviction is in the view that we are moving from a growth to a value market. One of the reasons I don\u2019t describe my view as \u2018high conviction\u2019 is not just because of the events of 2016 and how tough it has been for active managers, but because the most important sector as we move into 2017 is something I have not liked for the past decade \u2013 financials.<\/p>\n

What should investors expect from your asset class and your portfolio(s) going forward?<\/strong><\/p>\n

There\u2019s a whole interplay of things. I think currency is important. If we get a strong dollar it is usually good for European equities, and less good for emerging market equities. If I\u2019m right that we\u2019re moving from a growth to value market, I think this can knock on the head US equity outperformance versus other parts of the world. The value markets of the world are more Europe and Japan than they are the US, just by the nature of indices. So I think there might be an asset allocation shift to come. The thing that holds me back from having \u2018high conviction\u2019 is that the political upheavals that we\u2019ve seen \u2013 Brexit, Trump \u2013 are moving now to Europe, and that will be a whole lot trickier as it\u2019s not one nation, it\u2019s a currency bloc. I think you could easily see the wobbles come back on the periphery in the form of the euro, and that political risk holds me back from saying that relative to the US, Europe is now a \u2018buy\u2019. But, we will get through that political risk, and that is what might create the opportunity to buy Europe. European equities have seen big outflows this last year, and this gives me much more optimism. I went into 2016 not a bull, I end 2016 more bullish.<\/p>\n","protected":false},"excerpt":{"rendered":"

John Bennett, Head of European Equities, shares his outlook for 2017. He sees the potential for a continued rotation from a growth to a value-driven market as the key factor for European equity investors next year. While he maintains an overall bullish outlook, John acknowledges that currency, politics and the chance of deflation are all risks to this view. <\/p>\n","protected":false},"author":1,"featured_media":59129,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1483],"tags":[1663,1809,1655,1651,1807,1951,2068],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/59131"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=59131"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/59131\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/59129"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=59131"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=59131"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=59131"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}