September 2018 - A turbulent September sees mixed results for equities - Systematic Fund Manager's Comments

10 October 2018

Maxime Botti

RAM Systematic Fund

European Equities

Emerging Markets Equities

Emerging Markets Core Equities

North American Equities

Global Shareholder Yield Equities

Long /Short European Equities Fund

Long/Short Emerging Markets Equities

Long/Short Global Equities 


A turbulent September sees mixed results for equities

The divergence between the U.S. and “the rest” continued unabated in the third quarter. September witnessed a higher interest rate environment in the U.S. coupled with ongoing trade jitters between the world’s two largest economies which have continued to unnerve emerging markets. Trade tensions between China and the U.S. have been simmering in the background for the past two quarters, but we saw further escalation in September with sabre-rattling from both sides. Elsewhere, European markets were rocked by political turmoil stemming from Italy amid concerns surrounding the country's budget and deficit targets for 2019 and infighting in the government.

Trade tensions between the U.S. and China escalated in September as some $200 billion of Chinese products became subject to U.S. tariffs on September 24, (this is in addition to the $50 billion of existing levies). Meanwhile, $60 billion of goods from the U.S. became subject to higher Chinese tariffs, adding to the $50 billion already levied. Meanwhile, the S&P500 Index posted its best quarterly return since the fourth quarter of 2013 with domestic equities rising across the broad as investors enjoyed stronger-than-expected quarterly results. The Fed raised interest rates and cemented expectations for a further hike this year, reaffirming that a strong economy will probably warrant additional increases in 2019. Finally, oil prices have silently risen to a four-year high, which could further impact global growth prospects, providing an additional headache for emerging markets.

Chart of the month: Value vs Growth in Emerging Markets

Emerging markets value stocks have held up better than growth in 2018 thus far, perhaps indicative of a flight to safety by investors amid a backdrop of rising U.S. interest rates, an on-going trade war and rising fiscal stress in some developing countries.

Value vs Growth in Emerging Markets

Sources : RAM Active Investments & Bloomberg  - Note: Rebased to 100
(dates: 01.2018 to 09.2018)