Concerns over Greece and unexpected movements in European bond yields have seeped through as a cause of volatility in equity markets in recent weeks, something ECB President Mario Draghi warned this week that investors will have to get used to.
Managers commonly use stop-loss measures to close positions if they fall more than a specified limit, and Bell said he has already sold out of one unnamed fund caught out by short-term market movements.
“With high intra-day volatility it is not unusual to see falls followed by sharp bounces,” he explained.
“In these conditions, funds can have positions closed as a market falls only to miss out when a rally develops and we had become concerned that this manager was at risk of being in this position”.
Still, despite the possibility of a Greek default, Bell says Stanhope remains constructive on the eurozone in the medium term and believes a shock that leads to a setback in the equity market is likely to be a buying opportunity.
“While it is easy to forget the global economy amidst the Greek situation and Fed tightening cycle it is worth highlighting that China continues to face headwinds,” he added.
“The lack of demand from Western countries continues to put downward pressure on the economy despite government stimulus in the form of three interest rate cuts in six months in an attempt to offset deflationary pressures.”
