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This year we have broken with tradition and compiled our look-ahead as a dynamic infographic. Given the tumultuous changes seen in 2016 we have entitled our outlook 'Time for Plan B'. In our 2017 outlook we focus on more than a dozen issues, including the US economy, Europe's 'problem children' Italy and the UK, China, emerging markets and valuations of stocks worldwide.
After two decades of strong economic growth, emerging Europe has lost momentum. Robeco Emerging Markets Equities is currently not invested in Central and Eastern Europe because of the unstable economic policy in the region. “Poland, Hungary and the Czech Republic have to be careful that their economies do not end up in structural slowdown mode. Brexit is a longer-term risk.”
On November 3, 2016, the Central Bank of Egypt (CBE) announced a devaluation of the Egyptian Pound (EGP), stating that from now on free market forces will set the exchange rate. This move doesn’t impact our global emerging markets portfolios and has only limited impact on the African equities strategy.
India and Indonesia are both overweight positions in the Robeco Emerging Markets Equities portfolio. Just three years ago, both of these emerging economies were members of the Fragile Five, but they have learned their lesson.
Palm oil is used in many products including food and cosmetics. It is faced with several environmental and social issues that have become a reputational risk. We are engaging with companies in this industry to improve their performance on issues such as human rights, deforestation and labor standards.
After the recent coup attempt, President Recep Tayyip Erdogan has strengthened his grip on the country. In our view, current developments do not bode well for Turkey’s political and economic future, causing us to reduce our holdings in this country to an underweight position.
The Emerging Markets Equity team has turned tactically bullish on emerging markets equities. This means that we expect emerging equities to outperform developed equities both in the short and in the long term. In our outlook we explain why, addressing the concerns investors have about this asset class.
Don't expect the standard list of banks, insurers and asset managers in the portfolio of Robeco New World Financial Equities. Do expect a contrarian approach to the financial sector. “Investors need to consider the specific risk profile of this fund, though it's certainly not a downside. It is a solid investment fund of above-average quality that has earned the Morningstar Analyst Rating Bronze.”
The Central Bank of Nigeria ended a 16-month currency peg and moved to a floating exchange rate regime on 20 June. As a result, the Nigerian naira fell by 42%. This decision should boost Nigeria’s economic growth and foreign direct investments in the long run. However, Robeco Afrika takes a cautious stance until tangible improvements are clear.
Sweden is still the world’s most sustainable country, while the UK faces a stability threat due to the Brexit vote, and the refugee crisis is a major global risk, according to the latest RobecoSAM assessment.
The IMF’s April 2016 World Economic Outlook publication outlined how India will be the world’s fastest growing major economy through 2016-17 at 7.5% – something that has not gone unnoticed by fund buyers and investment professionals across the globe.
In his skeptical, contrarian and patient manner, Robeco Asian Stars fund manager Michiel van Voorst searches for companies that are wrongly undervalued. Join us on a contrarian investment journey through Asia. “China sometimes takes two steps forward and one step back, but the economy is reforming.”
After four months of discussions in Brazilian Congress, Brazil's Senate concluded that President Dilma Rousseff should face a full impeachment trial. The emerging markets equity team is cautiously optimistic and has reduced its underweight in Brazil.
Last year was a perfect storm for Emerging Markets: concerns about China amid slowing growth, volatile domestic equity markets and the removal of the currency peg to the US dollar, along with weak commodity prices, the Fed hike and its impact on local currency depreciation all took their toll.
Investors are still operating in a difficult, volatile market. Investment strategists Han Dieperink (Rabobank), Nathan Levy (ING) en Pim Lausberg (ABN Amro) agree on this, but they also each add their own interesting nuances to the outlook for financial markets and investing.
On January 7, the A-share market fell sharply after the opening bell. This triggered the new circuit breaker mechanism which had been implemented on the first trading day of 2016, freezing trading on the stock markets for the second time this year.
Easy stock price gains will be a thing of the past in 2016. This is why we are focusing even more on good quality companies with solid cashflows and high returns on invested capital. Europe and Japan are our favorite developed markets.
The added value of allocating to emerging markets (EM) has always been a topic of discussion among equity investors, especially when there was a large difference in performance with developed markets (DM). After a period of market decline, investors sometimes consider to lower the weight of emerging markets in their portfolio. What are the lessons that history can teach us?
Emerging markets are going through a volatile period, but the defensive investment strategy of Robeco Emerging Conservative Equities is proving its worth by outperforming the index. “Despite its relatively short history, we are very confident about the fund as is demonstrated by its Bronze Morningstar Analyst Rating. The results are more than promising.”
Emerging markets have been battered indiscriminately these past months. Now that the baby has been thrown out with the bathwater, it’s time to pick those stocks that have been unfairly hit and that can outperform in the medium to long term.
A market strategist once said that “if you buy commodities, you are betting against the ingenuity of people”. When natural resources become too expensive, human resources step in to find alternatives, says multi-asset investment head Lukas Daalder.
The growing popularity of passive investing using index trackers has enabled many investors to access emerging markets, of which Brazil is a prominent member, at relatively low cost. However, trackers lack the positive exposure to factors which can identify the most attractive stocks.
For about a decade many investors believed investing in the four BRIC countries – a concept launched by Goldman Sachs Asset Management – was the easiest way to profit from growth in emerging markets. But times have changed. Simplification is not always the best approach.
What's hot and what's not for the next five years? Our portfolio managers, economists and strategists favor equities over bonds, due to the prospect of higher interest rates, but warn that returns are likely to be lower than during the previous 2014-2018 period.
Emerging markets have become increasingly important to equity investors due to their fast growing economies. But what is the relationship between risk and return in these markets? Answer: it is flat or even negative. Empirical results show that the volatility effect - long-term equity returns at distinctly lower downside risk - is significant, robust and distinct.