Schroders’ Robin McDonald assesses the global market environment following a start to 2016 that has been characterised by extraordinary falls by the leaders of recent years and extraordinary outperformance by the laggards.
We on the Schroders Multi-Manager team have written repeatedly in recent quarters of how we felt investor positioning had become dangerously lopsided and vulnerable to rotation. Coming into this year, the atmosphere appeared as serene as the summer of 2007 for many of the market leaders. At the same time, it felt like early 2009 for the laggards – principally commodities and financials – who were enduring fierce bear markets.
So far in 2016, however, we have seen some extraordinary falls by the leaders of recent years and extraordinary outperformance by the laggards. By way of example, the Philadelphia Gold and Silver shares index (down 80% over the last five years) is up close to 50% year-to-date. The Nasdaq Biotechnology index in comparison (up 330% over five years) is down close to 25% year-to-date – a colossal dispersion in a two-month period. So in response to the question – ‘are we in a bull or bear market?’ – the answer appears to be both!
Indeed, if this rotation proves to be meaningful and not just the biggest short-squeeze in over 20 years, 2016 will likely feel like a bear market for the majority of active managers, as a bull market gets underway for the former laggards and the hitherto leaders suffer, at the very least, a sustained period of relative underperformance.
Read the full article
Important information
For professional advisers only. This material is not suitable for retail clients. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Schroders has expressed its own views and these may change. The data contained in this document has been sourced by Schroders and should be independently verified before further publication or use.
The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. We accept no responsibility for any errors of fact or opinion and assume no obligation to provide you with any changes to our assumptions or forecasts. Forecasts and assumptions may be affected by external economic or other factors.
Issued in March 2016 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 4191730 England. Authorised and regulated by the Financial Conduct Authority.