The market reaction following the success of Italy’s populist parties at Sunday’s general election will depend on how diluted their stance will be going forward on fiscal easing and being anti-Europe, according to experts.
The expected hung parliament following this weekend’s Italian election is likely to encourage fund selectors towards Italian equities and away from the fixed income sector, according to experts.
European-domiciled emerging market (EM) funds have seen a spectacular turnaround in fortunes at the start of 2018 with inflows up €14.5bn during January to reach a total €11.4bn of assets under management after there were €3bn of outflows in December, according to Morningstar data on global categories.
The re-election of Shinzo Abe as Japan’s prime minister in September has triggered a surge in inflows to Japanese equities. Is Japan’s recent streak of strong performance set to continue or are we witnessing yet another false dawn?
The big question on investors’ minds is whether equity markets will continue trending upwards in 2018. High valuations as such are not much of guide to answer that question, believes Valentijn van Nieuwenhuijzen, CIO of NN Investment Partners. Instead, investors should focus on trends.
The US equities rally has been given a fresh boost this year by continuing earnings upgrades and a weakening dollar. But Europe’s investors are not buying it.
Technology stocks have been among the top performers over the past 12 months. While forward-looking P/E ratios are not excessive on a long-term comparative basis, investors may consider cutting their exposure.
NN Investment Partners has increased its exposure to peripheral Eurozone government bonds to neutral after anti-EU populists failed to make significant inroads in last week’s Dutch elections.
Emerging market equities and debt have been the most popular asset classes with European investors this year. But now Donald Trump’s election threatens to spoil the party.
As part of their ongoing search for yield, European investors are intending to increase their exposure to emerging market debt. While ready to take on a bit more volatility, they still shy away from taking on duration exposure in the region.
Emerging market currencies are set to strengthen even further despite the significant appreciation from lows already seen this year, said NN Investment Partners.
Not only wholesale investors have reduced risk in the run-up to today’s Brexit referendum. Institutional investors, who are supposed to take more long-term views, have also moved to protect their portfolios.
