For media distrribution. Maay 2013
Schro
oders
s
Viirginie
e Maiso
onneu
uve’s Global
G
l Insig
ght
ay 201
13
Ma
By Virginie Maisonneu
M
uve, Head of Globall and Interrnational E
Equities
“Bu
uy in May an
nd stay tuned!”
Whiile global eq
quity marketts have beg un to norma
alise, they continue
c
to eexhibit some
unu
usual traits for
f this stage of the cyc
cle.
Duriing 2011, beta was the only thing tha
at mattered: a company’s beta sensitivvity determin
ned
50%
% of share price returns while
w
long-terrm fundamen
ntal characteristics such aas growth
pote
ential and valuation were largely igno red.
As m
macro conce
erns eased in
n the second half of 2012
2, risk appetitte began to nnormalise and
inve
estors started
d to factor in company fun
ndamentals. However, th
his process w
was incomple
ete:
for e
example inve
estors’ time horizons
h
rem
mained trunca
ated.
The search for yield
Sincce mid-Febru
uary, markets
s have seen yet another rotation. A strong rally si nce Octoberr
2012
2 and some renewed unc
certainty in th
he Eurozone
e triggered a bout of risk aaversion.
Unu
usually, equity markets ha
ave risen eve
en since risk appetite turn
ned but the m
markets sinc
ce
then
n have been led by defen
nsive and hig
gher yielding stocks. We believe
b
this i s emblematic of
the sstyle rotation
n taking place
e where inve
estors with hiigh cash pos
sitions, and too a certain extent
som
me bond invesstors, are sta
arting to reba
alance into equities.
e
Thos
se investors,, however,
remain cautious and have prreferred to in
nitially buy eq
quities with strong yield aand stable ca
ash
flow
ws despite tha
at valuations in some casses are quite
e high.
Therefore, unlike
e other equity normalizattion environm
ments, cyclica
al stocks whiich typically lead
in rissing marketss have not pe
erformed as w
well. In our view,
v
this is an
a anomaly tthat will be slowly
adju
usted as data
a from China strengthenss as the new economic le
eadership affifirms itself ov
ver
d imbalance between bond and equitty valuations
the n
next few months. Given the
t continued
s, we
expe
ect capital to
o continue to flow from bo
onds into equ
uities. As eco
onomic indicaators improv
ve,
this should transslate into gain
ns for more ccyclical stock
ks and comp
panies with loonger-duratio
on
grow
wth.
Buy
y in May…in time for H2
2 rebound?
Reccent leading indicators suggest the glo
obal econom
my might go through a sofft patch in the
seco
ond quarter as
a the inventtory cycle, tig
ghter fiscal policy
p
in the US
U and the fiiscal austeritty
and deleveraging in Europe have an imp
pact. Howeve
er, we expectt growth to reeaccelerate in
the ssecond half of
o the year driven
d
by the US and China, and to a certain extennt Japan.
So w
while the ada
age, sell in May
M and go a
away, has oftten been quo
oted in recennt years, we
wou
uld urge invesstors to look at things diffferently this year.
y
For media distrribution. Maay 2013
ormation ple
ease contactt the Schrod
ders PR team
m:
For further info
Este
elle Bibby, Eu
uropean Insttitutional, +44
4 (0)20 7658
8 3431/ estellle.bibby@scchroders.com
m
Cha
arlotte Banks, UK Interme
ediary, +44 (0
0)20 7658 25
589/ charlotte.banks@scchroders.com
m
Beth
h Saint, Interrnational, +44
4 (0)20 7658
8 6168/ elizab
beth.saint@s
schroders.coom
Kath
hryn Sutton, International, +44 (0)20 7
7658 5765/ kathryn.sutto
k
on@schroderrs.com
Important Inforrmation:
The views and opinions
o
conttained herein
n are those of
o Virginie Ma
aisonneuve, Head of Glo
obal
and Internationa
al Equities an
nd may not n ecessarily re
epresent view
ws expressedd or reflected
d in
othe
er Schroders communications, strateg
gies or funds
s.
For press and prrofessional in
nvestors and
d advisors on
nly. This docu
ument is not suitable for
retail clients.
Thiss document iss intended to
o be for infor mation purpo
oses only an
nd it is not inttended as
prom
motional matterial in any respect.
r
The material is not
n intended as an offer oor solicitation
n for
the p
purchase or sale of any financial
f
inst rument. The material is not
n intended to provide, and
a
shou
uld not be re
elied on for, accounting,
a
le
egal or tax advice, or inve
estment recoommendations.
Inforrmation here
ein is believed to be reliab
ble but Schro
oder Investm
ment Manageement Ltd
(Sch
hroders) doe
es not warran
nt its completteness or acc
curacy. No re
esponsibilityy can be
acce
epted for erro
ors of fact orr opinion. Thiis does not exclude
e
or restrict any duuty or liability that
Schroders has to
o its custome
ers under the
e Financial Services
S
and Markets Actt 2000 (as
ame
ended from tiime to time) or any otherr regulatory system.
s
Schroders has exxpressed its own
view
ws and opinio
ons in this do
ocument and
d these may change.
c
Reliance shouldd not be place
ed
on th
he views and
d information
n in the docu ment when taking
t
individ
dual investmeent and/or
strattegic decisio
ons.
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ued by Schro
oder Investme
ent Managem
ment Limited
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