The content displayed on this website is exclusively directed at qualified investors, as defined in the swiss collective investment schemes act of 23 june 2006 ("cisa") and its implementing ordinance, or at “independent asset managers” which meet additional requirements as set out below. Qualified investors are in particular regulated financial intermediaries such as banks, securities dealers, fund management companies and asset managers of collective investment schemes and central banks, regulated insurance companies, public entities and retirement benefits institutions with professional treasury or companies with professional treasury.
The contents, however, are not intended for non-qualified investors. By clicking "I agree" below, you confirm and acknowledge that you act in your capacity as qualified investor pursuant to CISA or as an “independent asset manager” who meets the additional requirements set out hereafter. In the event that you are an "independent asset manager" who meets all the requirements set out in Art. 3 para. 2 let. c) CISA in conjunction with Art. 3 CISO, by clicking "I Agree" below you confirm that you will use the content of this website only for those of your clients which are qualified investors pursuant to CISA.
Representative in Switzerland of the foreign funds registered with the Swiss Financial Market Supervisory Authority ("FINMA") for distribution in or from Switzerland to non-qualified investors is Robeco Switzerland AG, Josefstrasse 218, 8005 Zürich, and the paying agent is UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zürich. Please consult www.finma.ch for a list of FINMA registered funds.
Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco/Robeco Switzerland product should only be made after reading the related legal documents such as management regulations, articles of association, prospectuses, key investor information documents and annual and semi-annual reports, which can be all be obtained free of charge at this website, at the registered seat of the representative in Switzerland, as well as at the Robeco/Robeco Switzerland offices in each country where Robeco has a presence. In respect of the funds distributed in Switzerland, the place of performance and jurisdiction is the registered office of the representative in Switzerland.
This website is not directed to any person in any jurisdiction where, by reason of that person's nationality, residence or otherwise, the publication or availability of this website is prohibited. Persons in respect of whom such prohibitions apply must not access this website.
Equities have largely ignored all controversial policy statements by the new US leader, while bonds are more interested in what’s happening in Europe, says Daalder, Chief Investment Officer of Robeco Investment Solutions.
Echoing a phrase made famous by Trump’s predecessor Bill Clinton during his successful presidential campaign in 1992: “It’s the economy, stupid” is likely to be the prevailing force for investors rather than Trump, Daalder says.
“With the dramatic headlines seen in the first weeks of his presidency, one could be inclined to think that financial markets must have had a couple of rough weeks – but the opposite is true,” Daalder says. “US stocks have been stuck in a low volatile trading pattern for almost two months now, with the VIX volatility index steadily declining to close to its lowest level in the past 10 years.”
“As for the bond market, US bond yields have managed to settle down since the start of the year. Eurozone bond volatility initially declined, but is now rising again due to local risks. The only part of the financial markets that has recorded a steady rise in volatility has been the currency markets, with volatility now clearly in excess of the level that we saw at the time of the 8 November election.”
So what is really going on? Daalder says it boils down to markets focusing on what’s happening in the real world of economics, rather than the heady world of politics.
“Things become a lot easier to explain if we look beyond the Trump headlines and look at the other news, which has been sort of neglected lately,” he says. “For one, there is the world economy. Economic data has steadily surprised on the upside, indicating a firming in underlying economic momentum.”
“This is not a US phenomenon, but is also clearly visible in Asia – particularly in Japan – and most specifically in Europe. The Citi Surprise Index is now in positive territory for these three regions: the last time that all three areas managed to surprise on the upside on this magnitude was in 2010.”
“This improvement in underlying economic activity is also reflected in the quarterly earnings reports that have been published so far: the fourth quarter marks a decisive break with the previous four quarters, with earnings on track to show significant and broad-based growth. Gone is the fear of an earnings recession dragging the world economy down.”
‘Europe is currently showing better underlying momentum than the US’
“This clearly shows that as noisy and loud as Trump can be, as long as it does not have a direct impact on underlying economic growth and earnings, the stock markets have good reasons to generally ignore it. In other words: ‘It’s the economy, stupid!’”
“This also explains the spread development in international bond markets: economic data from Europe shows that – despite popular belief to the contrary – Europe is currently showing a better improvement in underlying momentum than the US. According to December data, German factory orders (although notoriously volatile) are now 8% above the level seen a year ago, while headline inflation (1.8%) also surprised on the upside.”
There are still political risks though, with populist movements set to figure strongly in parliamentary elections due in the Netherlands in March, and presidential elections in France in April and May, Daalder warns. And then there is the ongoing Greek bailout saga which hasn’t reared its head for a few years, but is indirectly linked to Trump and whoever takes power in Europe.
“The French presidential election is shaping up to become the key event for financial markets,” he says. “The anti-EU National Front party of Marine Le Pen is clearly leading in the polls, and although most polls indicate that she will be beaten in the second round of the presidential vote, it is difficult to deny that the counter candidates do not look very strong right now.”
“The latest Greek economic data has been weak again, while the IMF is scheduled to decide on whether it will extend its credit to the country,” Daalder warns. “The IMF has been a reluctant participant in the rescue package so far, but with Trump becoming president of the IMF’s biggest stakeholder, things might turn negative fairly quickly. In that case, attention will shift to the willingness of core European countries such as France, Germany and the Netherlands to support Greece in an election year.”
Daalder warns though that while markets are ignoring rhetoric, risk levels have still gone up – which means Robeco Investment Solutions remains cautious for allocations in its multi-asset portfolio.
“We prefer to stick to our neutral stance in equities for now, and look for relative trades instead,” Daalder says. “On balance we have put up a relative bond trade (long US, short France) to profit from the underlying increase in European political risks, while at the same time locking in the much higher US bond yields.”
“Additionally, we have moved to an overweight in emerging market debt (EMD). The spread on EMD is currently higher than on high yield, and at a much higher credit quality, while on average the currencies of the EMD bucket are undervalued. Although this does not guarantee that currencies will be a positive driver in the short run, their predictive power rises over time. Finally, we have put in place a long position in the US dollar.”