Henderson fund manager John Bennett has welcomed the recent drop in the markets, arguing that it could signal the end of emerging markets’ outperformance and the rise of Europe.
Last month, global equity markets were hit by a sell-off after investors became concerned by the prospect of the Federal Reserve scaling back the pace of its $85bn-a-month bond-buying programme and impact of stress in the Chinese credit market.
FE Analytics shows the FTSE 100 shed 5.26 per cent in June, the FTSE Europe ex UK lost 4.78 per cent, the S&P 500 was down 1.43 per cent and the MSCI Emerging Markets Index fell 6.4 per cent. The Nikkei 225, however, managed to gain 0.89 per cent over the month.
Bennett, manager of the £1.4bn Henderson European Selected Opportunities fund, says: “While welcoming recent falls in markets we would prefer some more weakness and indeed believe there is a fair chance that this wish will be granted. Our working assumption remains that, after the almost uninterrupted gains from last summer’s lows, equities are likely to be a good deal more volatile in the months ahead.
“Yet, this is a short term consideration. While too many investors seem to have developed an allergy to volatility we believe that the current period actually masks a very important change in dynamics and one that should be embraced: we are convinced that the end of the outperformance of emerging market assets is upon us.”
The manager adds that the flip side of the end of emerging markets’ outperformance could be that European equities head into a sustained period of stronger gains.
Ahead of June’s sell-off, Bennett predicted that the markets to be “tested” in the near term and said the recent rise in European equities had given him reason to “temper any excessive optimism” in the asset class.
Henderson European Selected Opportunities’ cumulative performance to 23 July 2013
|Henderson European Selected Opportunities||5.85%||11.91%||40.00%||41.72%||47.17%|
|70 / 104||25 / 102||44 / 101||19 / 97||19 / 86|
Source: FE Analytics