Emerging Market Equities on the way back? According to GAM, UBP and Barclays they are certainly worth another look. Source and Pictet agree that the oil price collapse may ultimately prove to be a good thing. Deutsche Asset Management is more cautious about high yield and Novus explains the win/loss ratio.
- In “Darkness before Dawn” Tim Love from GAM debates why it may be riskier to be out than in EM equities. Among the top-six indicators of emerging equity upside is EM/DM relative value. The developed market / emerging market (DM/EM) relative value is back to 2004 levels. Tim is kind enough to remind us that a 400% rally in EM started in 2004.
- UBP is also asking itself the question whether 2016 will be a year for a turnaround in EM. They point out that one of the factors (among others) that could be in favour of EM equities is that most investors are considerably underweight EM. Hence small improvements can have major effects.
- Deutsche Asset Management is one of the first to come with an update of the 2016 outlook. The commodities bear market has made them more cautious on U.S. and EUR high yield. But they keep the faith in existing fundamentals and the equity market, although the equity indices forecasts for 2016 have been altered downwards.
- Source discusses the history of oil price collapses and equity markets. They view “the decline in oil as a transfer of income from producers to consumers”. They argue that this may give global growth a boost, if the spending’s of users rise more than the fall of producer’s. But at this point in time the market does not agree with them (yet?).
- “The Novus Guide to Win/Loss Ratio” explains the importance of this ratio. Off course you already knew this ratio measures how much a manager makes when they are right versus how much they lose when they are wrong. But how should it be interpreted? And how is it related to the “batting average” ratio? Novus tells it all.
- Pictet asks itself the question whether 2016 will end as badly as it started. They give five reasons why the pessimism looks overdone. In one of them they argue that the lower oil price will be positive for the economy. Among other things will it boost the spending power of consumers.
- Barclays made A Tactical Asset Allocation Adjustment. They reduced the allocation in Cash & Short Maturity Bonds and increased the allocation in EM and DM equities.