The annual predictions season officially kicked off the moment we tore the last page off our 2015 calendar. Anything from simply making future projections based on existing movements and trends to coming up with top-of-your-head ideas for ‘black swans’ – unexpected events that could have a major impact.
We gave Lukas Daalder, CIO Investment Solutions, thirteen potential scenarios and asked him how likely they are to occur. And, if they do, what their impact will be on the financial markets.
“Of all the variables that play a role on the financial markets, volatility is strictly speaking the most difficult to predict. Its main characteristic is that it always picks up when you are not expecting it to. In the current scenario, there are a number of reasons why the high volatility of 2015 is likely to continue. Firstly, the divergence in the monetary policy of the major central banks (the Federal Reserve is tightening; the ECB and Bank of Japan are easing). There is also a lot of uncertainty about oil: is the low oil price purely a supply issue or are there also demand-related reasons? And then there’s the falling ISM Index in the US which has now dropped to below 50. That’s also a cause for concern. Of course, volatility doesn’t necessarily have to be negative. In volatile markets prices still generally move higher, and that is our base scenario for 2016.
‘Historically nine out of ten geopolitical conflicts are non-events from an investor’s perspective’
“This really is a serious conflict. But investors often overreact to geopolitical tensions. A year ago we had a conflict between Russia and Ukraine; it didn’t lead to a new world war. The tensions between Russia and Turkey haven’t escalated either. Historically the best strategy for investors is to ignore geopolitical conflicts because they always seem to be non-events from the markets’ perspective.”
“The slowdown in the Chinese economy has been underway for some time now and has lasted longer than anyone thought it would. The government is providing stimulus but economic growth is still declining. The official growth figure is around 7%, but unofficial estimates are nearer the 3-4% level. It is clear that the Chinese government is not just going to stand back and watch everything collapse. Of course there are limits to the extent to which an economy can be controlled; but if anyone can do it, it’s the Chinese.”
“You really can’t imagine it happening – but that’s what we thought six months ago and Donald Trump is still doing well in the opinion polls. He might even become the Republican candidate. But he won’t have much chance against Hillary Clinton. That said, US elections don’t have much impact on the markets, unless you believe in the presidential cycle, that is. In that case you shouldn’t hold equities in 2016, but 2017 and 2018 will be great years for stocks.”
‘There is more chance of a Brexit than of Trump becoming US president’
“There is little chance of a Brexit, but it is still more likely than Trump becoming US president. As a result of the refugee problem, anti-EU sentiment is increasing in the United Kingdom. Many British people see the EU as an expensive, paper tiger. However one would expect good sense to prevail in the referendum. Recent polls show that the number of EU proponents is falling, but that they still form a clear majority.”
“Our base scenario is still for the US dollar to rise on the back of Fed rates hikes. There’s a risk that everyone expects this and is already positioned for it to happen. If US growth stagnates and the Fed decides not to raise interest rates further, it could lead to a short squeeze. At the moment we prefer European stocks to their US counterparts and that won’t change if the euro appreciates by a couple of percent.”
“This seems likely and is our base scenario for 2016. Fed Chair Janet Yellen carefully prepared the ground for the first rate hike, which went off without a hitch as far as the markets were concerned. It remains to be seen whether the same will happen this year in the event of further rate hikes.”
“At the end of 2015, it became clear that ECB president Mario Draghi had overplayed his hand and he was publicly called to order by his fellow board members. Sentiment within the ECB seems to be less unanimously positive than we thought, which is worth bearing in mind. Overall things are not looking too bad in Europe and further easing is less likely than in Japan. The challenge lies in the fact that the effects of the policy will gradually weaken over time.”
“Imagination is running rife when it comes to technology stocks, certainly in the case of a few names. Expectations for Big Data, the Internet of Things and the Sharing Economy have all become exceedingly optimistic. You can’t project ahead using existing trends indefinitely. Of course we will witness major new developments, but there is a risk that to a large extent these are already priced in.”
“This would be nice and is quite feasible, but the question is within what timeframe. The conflict between Saudi Arabia and Iran could push up oil prices, but that’s not something we want to happen. Production levels are still high while demand has not picked up significantly. A very strong recovery in the commodities market is not really on the cards.”
“You can see it happening. Sweden has ‘closed’ the border with Denmark, which has ‘closed’ the border with Germany. There seems to be no large-scale, clear strategy. The question is whether this will impact the markets. Perhaps it could, if all the dissatisfaction culminates in a Brexit.”
“There is no doubt we’ll see more defaults. But as long as the US economy continues to grow, I don’t expect it to be a tidal wave. However, if economic growth ebbs away, we could see defaults occurring, which in turn make it more difficult for companies to borrow, creating a vicious circle. Looking at current corporate refinancing requirements, I don’t think this is a major threat for 2016 or 2017.”
“An unexpected return of high levels of inflation would be the best example of a black swan. Only it’s difficult to see where this could happen. Perhaps as a result of a tight US labor market and rising wages in China, but these are both still a long way off. If inflation does re-emerge, it will be totally unexpected and the impact on the financial markets – particularly the bond market – will be huge.”
当資料は情報提供を目的として、Robeco Institutional Asset Management B.V.が作成した英文資料、もしくはその英文資料をロベコ・ジャパン株式会社が翻訳したものです。資料中の個別の金融商品の売買の勧誘や推奨等を目的とするものではありません。記載された情報は十分信頼できるものであると考えておりますが、その正確性、完全性を保証するものではありません。意見や見通しはあくまで作成日における弊社の判断に基づくものであり、今後予告なしに変更されることがあります。運用状況、市場動向、意見等は、過去の一時点あるいは過去の一定期間についてのものであり、過去の実績は将来の運用成果を保証または示唆するものではありません。また、記載された投資方針・戦略等は全ての投資家の皆様に適合するとは限りません。当資料は法律、税務、会計面での助言の提供を意図するものではありません。
商号等： ロベコ・ジャパン株式会社 金融商品取引業者 関東財務局長（金商）第２７８０号
加入協会： 一般社団法人 日本投資顧問業協会