‘Plan B’ is better for equities than government bonds

‘Plan B’ is better for equities than government bonds

19-01-2017 | インサイト

Equities remain Robeco’s preferred asset class for 2017, offering new opportunities but also risks as ‘Plan B’ is rolled out in the Trump era, says Lukas Daalder.

  • Lukas Daalder
    Lukas
    Daalder
    Chief Investment Officer

Speed read

  • Moving from monetary to fiscal stimulus is better for equities
  • Bonds face threat of rising rates and widening US-Europe disconnect
  • Elections in Europe are main risk for 2017 amid rise in populism

Addressing the Robeco Live conference in Rotterdam, he warned that government bonds face rising yields – which means falling values – in 2017, with a growing disconnect between US and European sovereign debt.

But he remains optimistic about the prospects for global growth, as the world gradually moves from the ‘Plan A’ of relying on central bank-led monetary stimulus, which has not had the desired effect and has led to greater populism, to the new ‘Plan B’ of using fiscal stimulus such as higher government spending on infrastructure instead.

“Equities are still the most promising asset class for 2017, but it comes with a huge disclaimer – Trump,” says Daalder, Chief Investment Officer of Robeco Investment Solutions, and a co-author of the 2017 Outlook.

“If Trump behaves and doesn’t do anything rash, then this should be an OK year for equities, but he’s the biggest uncertainty facing the markets. We’re all waiting for the details of his plans, and a lot will depend on what he actually does. But we remain moderately optimistic about growth, and our key theme is that it’s time to move from Plan A to Plan B, where fiscal stimulus eventually replaces monetary easing.”

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

Moving the supertanker

Daalder uses the analogy of trying to change the course of a vast state-owned ship that has so far been powered by quantitative easing and rate cuts, in mostly unsuccessful efforts to stimulate economies, and now needs to be sent in the other direction.

“If you look at economies, they are generally subject to self-enforcing trends, where if the trend is down, it will continue to do that for some time,” he says. “It’s like trying to turn around an oil tanker. People have expectations, and if these are not being met, they won’t invest, hire workers or build new factories. So growth doesn’t reach the level that is needed; so more people get fired, more investments get scaled back, and it becomes a self-fulfilling prophecy.”

“But the same is true on the upside: when people expect better times ahead, they invest in new factories and hire more people. For five years we’ve basically been in this downtrend, so we need to find out what can turn this ship around. ‘Plan A’ was to do it with monetary stimulus, but it hasn’t worked, so ‘Plan B’ would be some sort of fiscal stimulus.”

Looking for the spark

“Governments could start spending and building things, but that’s not going to be the whole story. We don’t want governments to take all the burden, but we need someone to be the spark that makes the oil tanker move in the opposite direction, and then you have a sustainable recovery.”

“So ‘Plan B’ is essentially whether governments take on this role, and with Trump, everyone seems to think that they will, and that it might work. They think that Trump will lower taxes and build new infrastructure, but in Europe the outlook is a lot less clear because there are budgetary rules for spending, keeping deficits to within 3% of GDP.”

“Here, some countries have room for higher spending, such as Germany, and others don’t. So it’s less clear where such a turnaround can come from unless you get different governments and a shift in power as we saw in the US. That’s more an issue for 2018 than 2017.”

Will Europe see other Brexits?

Daalder says Europe’s biggest risk this year is the national elections in three of its largest economies: the Netherlands, France and Germany. All three countries have significant populist movements that have the potential to follow the anti-EU stance seen in the Brexit in the UK last June.

The Dutch will set the ball rolling on 15 March, with populist leader Geert Wilders looking to build on the Brexit sentiment in the parliamentary election. French Presidential elections, in which far-right leader Marine le Pen is a candidate, occur in two stages on 23 April and 7 May. German federal elections – which could see Angela Merkel unseated as Chancellor – are due to be held between August and October (see chart).

“The elections in Europe, and whether we going to see a further rise of populism, are a major risk factor in Europe,” he warns. “In the Netherlands, the odds of Geert Wilders becoming prime minister and going for some sort of EU exit is small; the real risk is Marine Le Pen becoming President of France.”

“So the outlook is mixed for Europe. But in general, we can clearly see higher US growth, while at the same time warning that Trump has increased uncertainty economically as well as on financial markets. The equity market seems to have embraced him, but the odds of unwanted outcomes have clearly increased.”

Bonds face bumpy ride

That lack of clarity on Europe and the potential for adverse outcomes for investors is reflected in the government bond market, Daalder says.

“For bonds, our message is more outspoken for the US than it is in Europe,” he says. “In the US we expect bonds to suffer, in the sense that yields will go higher, combined with higher inflation and debt caused by the planned stimulus by Trump. The Fed is also hiking rates, so there’s a clear story here that yields will rise. It’s never a one-way street, but the trend of ever-lower yields has been broken in the US.”

“The picture for Europe is lot less clear because normally the Continent follows what happens in the US. Since Trump’s election, Europe has only partially followed, and the bond spread differential between US Treasuries and German Bunds is now at the highest level for 30 years. That’s all to do with the European Central Bank (ECB) being an active buyer and therefore limiting the negative spillover on yields from the US.”

This article is part of our Outlook 2017 event
This article is part of our Outlook 2017 event
Overview of all articles

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