“We need to be patient,” said European small cap manager Nicole Neubelt of MFS Investment Management. “But more Draghi actions and the benefits of a lower euro will eventually push through.”
Central bank addiction
Barry Norris of Argonaut Capital Partners agreed, insisting the market nervousness was not caused by ‘indigenous growth issues’ about Europe. “The weakness we are seeing in Europe is more about the manufacturing exports to the emerging markets, he said. “People are looking for the cause of this crisis, but we have now realised that the global economy can’t grow without a monetary stimulus and as soon as central banks withdraw the stimulus, economies stop growing. Therefore, within a few weeks the Fed or the ECB will announce some policy which will make the markets a bit happier and then that will form a base in the market.”
Russian sense
There was also a consensus that the conflict in Russia will not escalate further, as there is too much at stake for Russia. “In the long run Russia needs to come closer to Europe. If you see at what speed they are now burning their foreign reserves, that will start to feel uncomfortable,” said Luc D’Hooge, head of emerging market debt for Vontobel Asset Management.
D’Hooge is seeing some signs of rapprochement by the Russian side. “Brainwashing on Russian TV has been unprecedented, but the tone is changing. They don’t anymore talk about the fascists in Ukraine. This signals the Russians are ready to come to some sort of agreement.”
Argonaut’s Norris agreed. “The Russia-conflict will not cause long-term damage because Russia is dependent on Europe to develop its economy.”
While the speakers were playing down the macro risks threatening investors, delegates are still poised to look for protection against further stock market slumps. Close to 60% of them said they would increase exposure to long/short equity products, while none will decrease their allocation.
