Commentaries

October 2018 - October’s selloff spooks markets - Systematic Fund Manager's Comments

14 November 2018

Emmanuel Hauptmann

 

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 

 

Global markets turned sour in October, as equity investors felt the full force of a near "perfect storm". A rising interested rate environment, declining global growth prospects and a stark warning from the IMF concerning financial stability risks and continued trade tensions have all driven markets lower. Elsewhere the UK and Italy have seen tensions continue to rise as politics came increasingly into play. The VIX (CBOE Volatility Index) touched 28.8, its highest level since February 2018, while sentiment was further eroded by discouraging forecasts from some of the world’s largest Technology names triggering a wider selloff and reigniting fears that the longest bull market in history had ended.

 

Turning a frown upside down

There is little doubt that October has been a hard month for investors. However, this recent market weakness could create a potential investment opportunity, and emerging markets may be the place for investors to once-again evaluate, bearing in mind the current direction of interest rates relative to rates outside of the U.S. will likely have a strong influence on EM equity performance.

 

Chart of the month: Nasdaq posts worst month since 2008

The Nasdaq has lost almost 10% in October leaving it poised for its worst monthly return since November 2008. We have noted that Technology stocks have now begun to underperform, and we think there is potentially more pain ahead for this sector. 

Nasdaq Monthly Returns

Source: RAM Active Investments & Bloomberg
Note: Monthly change of Nasdaq Composite, from October 200 to October 2018

 

EMMANUEL HAUPTMANN RAM Active Investments

 “We are currently experiencing one of the most difficult stock selection environments since we launched our Long/Short approach in 2009. The US rate increases have progressively led to large unwinding of positions by investors and hedge fund peers in recent weeks, leading to large deviations by many stocks from their intrinsic fundamental value. We rely on our strong quality bias, our extensive strategy diversification and strong underlying liquidity to navigate these volatile phases.”

In addition we’ve produced a short paper covering our observations across the different regions, and their potential impact: click here to read.