Like their peers in the rest of Europe, Dutch investors have been trimming their European equity positions over the course of the year, and are no longer overweight the asset class, which had been their default position for much of the past three years. Only just over a quarter of interviewees plan to increase their exposure in the next 12 months, and only after a market correction. This is down from almost six in 10 at the end of last year. However, very few investors plan to decrease their allocation further.
Uncertainty abound
The majority are simply mired in uncertainty, which is reflected in their macroeconomic outlook. Uncertainty about the European economy has shot up this year across Europe, and the Netherlands is no exception. Interviewees signalled an array of contradictory indicators on the continent. The UK’s Brexit vote, a range of elections coming up in Europe over the next year and the Italian constitutional referendum this autumn all pose downside risks. And the majority of investors we talked to do not expect any meaningful further stimulus from the ECB.
However, this doesn’t mean they are negative about the prospects for the European economy. “Even though the ECB cannot do much more, the European economy has been growing for a while now and there is room for fiscal stimulus from Eurozone governments,” said Dinant Wansink, an economist at the Dutch insurance company Delta Lloyd.
When the US sneezes…
The main downside risks to the macroeconomic outlook are perceived to be across the Atlantic, Wansink and other interviewees said during a week when equity markets were rattled following Hillary Clinton’s pneumonia diagnosis. Several investors said they see the US economy at the peak of a cycle, and expect GDP growth to decelerate. This could lead to a global slowdown, and to something a lot worse if Donald Trump gets elected to the White House.
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US equities are understandably even less popular than their European equivalents. There has been talk that they were perceived as a safe haven in the wake of the Brexit vote, but the sudden increase in market volatility in the US last week somewhat undermined that case. Only one interviewee said he would increase exposure to US equities, while the vast majority intend to stick to their underweight positions.
