Multi-manager verdicts on 2016: Nothing can be taken for granted


John Chatfeild-Roberts, head of strategy for the Jupiter independent funds team

Investors began the New Year nursing a collective hangover with a mood to match, looking for trouble, whether it was there or not.

Concerns over the risks posed by China’s rising debt and slowing economy, European banks’ financial vulnerabilities, talk of the possibility of another US recession, and the ramifications of still-collapsing commodity prices became toxic, combining to give the worst start to a year for shares this century.

By mid-February the FTSE 100 had fallen by 22 per cent from its April 2015 peak, thus technically a “bear market”. However, after this initial tizzy, calm was restored and fears abated. That’s not to say all have disappeared, some have merely been parked while others, especially the likelihood of an imminent US recession, now seem quite misplaced.

Central bank policy was still a significant driver behind the performance of bonds and equities in 2016. The Fed, however, missed its forward  guidance by a country mile, further undermining its credibility; the Bank of England has been no better.

But 2016 will also be remembered as the one in which the outcome of political events on both sides of the Atlantic had a significant impact on investor sentiment. That Brexit and Donald Trump’s victory went against form should leave investors in no doubt that the outcomes of the elections in France, Holland and Germany cannot be taken for granted.

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Bambos Hambi, head of fund of funds management, Standard Life Investments

2016 has been a year of surprises. Investors are now operating in a “world of low numbers”, which strengthens the case for sustainable yield as an investment approach. Testing the sustainability of that yield is important in an environment where corporate earnings have come under pressure.

Politics is also increasingly affecting fin-ancial markets. We are now in an environment of radical uncertainty, with multiple potential outcomes to political discussions and treaty negotiations. All this means fiscal policy and structural reforms are becoming more important if countries are to escape the low inflation world. While the carrot for policymakers is improved levels of economic output, the stick is increased levels of support for populist parties.

One of the most significant trends during 2016 has been plunging government bond yields. A variety of drivers explain this phenomenon: economic, demographic, regulatory and positioning. Furthermore, concerns over Europe have driven safe-haven flows.

In addition, policymakers are asking more questions about the efficacy of monetary policy as unintended consequences, such as the adverse impact of negative interest rates in Japan, become increasingly apparent. As uncertainty rises, and with it the potential for increasing risk, active diversification across asset classes becomes an ever more useful tool for investors.


Patrick Schotanus, multi-asset investment strategist, Kames Capital

This year got off to a bad start, largely caused by the combination of the late 2015 rate hike by the Fed and Chinese currency turmoil. However, more than anything 2016 has been characterised by Brexit and the US presidential elections won by Donald Trump.

On both occasions investors mistakenly relied on political experts, including pollsters, as well as bookies, to inform their decisions as judged by the violent reactions following these events. Assets that particularly suffered were sterling (down 15 per cent against the US dollar) and respectively US bonds (the US 10-year bond was down 6 per cent from its July peak at the time of writing).

UK equities, particularly the large exporters, outperformed those from other major developed markets. The multi-year theme of yield chasing continued and resulted in strong demand for high yield and a recovery of EM equities. The latter also benefited from a relatively stable dollar.

Commodities, and the miners that produce them, experienced mixed fortunes. After a final leg down to below $30 (as part of its collapse from a peak above $100), oil started to recover in February and reached $50 in October. Gold bounced strongly in the beginning of the year but has recently struggled against a strengthening dollar.

For 2017, we expect investors will remain spellbound by political scenes, although the actors will likely change.