Beware the 'self-fulfilling outcome' of market sentiment

Beware the 'self-fulfilling outcome' of market sentiment

08-02-2016 | 月次アウトルック

Financial markets are in danger of creating a ‘self-fulfilling outcome’ that will send asset values even lower unless common sense breaks out, says Robeco’s Lukas Daalder.

  • Lukas Daalder
    Lukas
    Daalder
    Chief Investment Officer

Speed read

  • Market remains fixated on flawed assumptions about China, oil and high yield
  • Poor sentiment could spill over into the real economy, particularly credits
  • Robeco Investment Solutions remains overweight equities but cuts holdings

The worst performance for equities in a January for many years was based on flawed assumptions about China, oil and the high yield market, and could lead to a ‘boom-bust’ scare that will make matters worse, says Daalder, Chief Investment Officer of Robeco Investment Solutions (RIS). 

He says the RIS multi-asset portfolio is keeping its nerve by maintaining its overall overweight to risky assets, though the team has taken some risk off the table by reducing the size of the overweight to developed market stocks, which have been hit hard in the sell-off.  

“Developments in financial markets can spill over to the real economy, leading to a self-fulfilling outcome,” says Daalder. “We are not talking about the wealth effect of the stock market correction that we have seen so far – that’s of second order. The bigger risk is of a credit event that could lead to a (temporary) freezing up of credit markets. This can be linked either to the drop in oil, or to a strong (unexpected) move in financial markets.” 

“The drop in oil can trigger a default of oil companies – which we think would not be much of a surprise at this stage ¬– or of oil-producing countries, which would be less anticipated. Sharp moves in financial markets can always lead to the demise of a hedge fund or – as we saw in December – of a fund manager (Third Avenue). These kinds of events can lead to the loss of liquidity, for example in the US corporate bond market, which in turn would put even healthy companies at risk. In such a scenario, the US economy can indeed slip into a recession.”

最新の「インサイト」を読む
最新の「インサイト」を読む
配信登録

Corrections are commonplace

Daalder says it is unrealistic to expect human sentiment not to play some sort of role, since many investors active today would have memories of prior painful market turmoil. “But corrections happen more often than you think,” he says. “Now, this is certainly not an attempt to downplay what happened at the start of the year. We are the first to acknowledge that this has been a pretty painful period.” 

“The point we are trying to make is that 10% and 15% drawdowns happen to be pretty regular events; the fact that this one happened at the beginning of the year holds no deeper meaning. Reading through the research reports, the newspapers and the blogs, we get the feeling that this message is sometimes lost.”  

“But with all the talk of hard landings in China and recessions in the US, it is not surprising that certain investors are scrambling out of the market for fear of ‘the next big one’. The boom-bust fear is bigger than it was prior to 2000, which means that moves could easily be exaggerated compared to what we have seen in the past.” 

Corrections happen more often than you think. Source: Bloomberg, Robeco.

There is no January effect!

Daalder also doesn’t believe in the supposed ‘January effect’ – the notion that a poor start to the year means the remainder of the year will also be bad. “There are many examples of weak Januarys which were followed by excellent returns later that year,” he says. “More generally, we would say it is the future, not January, that determines the fate of financial markets.” 

“Having said that, there is no denying that a sell-off in January clearly feels different to a sell-off that takes place in – say – September. The close of the previous year is the anchor to which we judge the year as a whole; it is the year-to-date performance that most traders and investors wake up with each morning.”

‘It is the future, not January, that determines the fate of financial markets’

“Unfortunately, bad Januarys tend to stick in the memory of everyone. Headlines like ‘the worst start of the year since 1930’ – which was the case for the first week of trading of the S&P 500, for example – only help to trigger the feeling that we are experiencing something outspoken, something that has seldom happened before. But they’ve all happened before.”

“And from the pessimistic reports, the majority of investors may have the impression that we have just experienced the biggest drawdown since the 2007-2009 debacle. We haven’t. In the case of the US, the current sell-off is of the same magnitude as the one seen in September last year, and in case of the MSCI World, we saw comparable (and bigger) drawdowns in 2010, 2011 and 2012.”

Why is a low oil price bad?

Daalder says the underlying economic fundamentals – while not ideal – do not indicate impending recessions, and the premise that a low oil price is bad for everyone remains flawed. “From a fundamental perspective, the sell-off has clearly created opportunities,” he says. 

“Markets have traded on the back of the ‘low-oil-is-purely-bad’ premise, which we continue to believe is a very one-sided way of looking at things. We do not believe that the US economy is on the verge of a recession, nor that the Chinese economy is collapsing, even though some have mistaken the Chinese stock markets to be a good leading indicator for the underlying economy. Financial markets have overshot; that continues to be our call.” 

“Having said that, sentiment is very weak, and we are currently less confident that this over-reaction will end soon. Overall, we think that uncertainties have risen, which is why we also have decided to scale back our risk profile somewhat. As we feel the risk-reward trade-off for high yield is interesting at the current spread levels, we have lowered our risk by increasing our underweight to emerging market equities, and by moving developed market equity exposure into more defensive stocks.” 

重要事項

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。

ご契約に際しては、必要に応じ専門家にご相談の上、最終的なご判断はお客様ご自身でなさるようお願い致します。

運用を行う資産の評価額は、組入有価証券等の価格、金融市場の相場や金利等の変動、及び組入有価証券の発行体の財務状況による信用力等の影響を受けて変動します。また、外貨建資産に投資する場合は為替変動の影響も受けます。運用によって生じた損益は、全て投資家の皆様に帰属します。したがって投資元本や一定の運用成果が保証されているものではなく、投資元本を上回る損失を被ることがあります。弊社が行う金融商品取引業に係る手数料または報酬は、締結される契約の種類や契約資産額により異なるため、当資料において記載せず別途ご提示させて頂く場合があります。具体的な手数料または報酬の金額・計算方法につきましては弊社担当者へお問合せください。

当資料及び記載されている情報、商品に関する権利は弊社に帰属します。したがって、弊社の書面による同意なくしてその全部もしくは一部を複製またはその他の方法で配布することはご遠慮ください。

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