Janus Henderson Investors (NYSE:JHG) (ASX:JHG) today released the
Janus Henderson Market GPS™ 2018 report, in which
portfolio managers Ashwin Alankar, Alex Crooke, Bill Gross, George
Maris and Darrell Watters, among others, provide insights into what
they see as key investment themes that are likely to impact global
capital markets over the coming year.
The 3rd edition of Market GPS aims to highlight likely headwinds
and tailwinds that sectors, regions and asset classes might face in
the months ahead, to help advisors and investors stay informed of
major themes potentially impacting markets.
Topics discussed this year include:
- The potential for continued expansion in equity markets
- The path to normalization in central bank policies
- The likelihood of an end to record-low volatility
- Innovation and disruption across sectors caused by advances in
technology
- Opportunities in emerging markets
The report is available on the Janus Henderson
website: campaigns.janushenderson.com/marketgps
Market Outlook: Eight Years and CountingWhile
stocks have roughly tripled over the past eight years, proprietary
signals from Janus Henderson’s Adaptive Multi-Asset team’s
options-based tail risk model suggest that a correction in global
equities is not imminent. Options prices signal limited upside for
stocks and don’t forecast a looming downturn. Equities appear
fairly priced and could be propelled higher by factors including
U.S. tax reform, continued quantitative easing in Europe and Japan,
and an upward trajectory in global growth.
“The options market does not believe that the equity market has
to self-correct just because we’re a decade into the expansion,
while the average business cycle lasts six years. We’re in the camp
that this expansion can continue,” said Ashwin Alankar, Ph.D., Head
of Global Asset Allocation & Risk Management.
Central Banks: The End of an EraWith the global
economy on solid footing, monetary policy normalization is under
way and divergent tightening strategies by the U.S. Federal Reserve
and the European Central Bank augur well for an orderly and gradual
tightening of credit conditions and reduction in global liquidity.
The measured, sequential approach could help keep a lid on bond
yields, says Bill Gross, Portfolio Manager on the Global
Unconstrained Bond strategy.
“The Fed would be risking policy error if it surprised markets
with more aggressive than expected hikes at the same time it’s
trimming its balance sheet,” said Nick Maroutsos, Portfolio Manager
of the Absolute Return Income strategy.
“The ECB recently decreased the level of monthly asset
purchases, but it extended the program’s duration. The extension is
partly due to weak inflation, but the smaller quantities may be due
to a limited number of securities available for purchase rather
than any underlying optimism,” said Chris Diaz, Head of Global
Aggregate.
Market Volatility: Gone Today, Here
Tomorrow?The low rate environment has created a number of
market distortions, among them record-low volatility. As U.S.
monetary policy and rates begin to normalize, so too, should
volatility, as more investors stop selling volatility as a way to
earn yield.
“If volatility stays within a certain range, the seller simply
collects the carry (a premium). Since realized volatility has been
range-bound, this trade has appeared to be a low-risk way to
generate income, enticing more investors and creating a situation
in which lower volatility begets even lower volatility,” said John
Fujiwara, Portfolio Manager of the Liquid Alternatives
strategy.
George Maris, CFA, Portfolio Manager of the Global Alpha Equity
strategy, believes the VIX is not the only measure of volatility or
investor sentiment. In his view, many investors are more fearful
than what the VIX, an average of investor sentiment, suggests.
“This may be the most loathed and nerve-wracking bull market that's
ever existed,” he says.
Technology: Innovation and Disruption Four
mega-digital themes are creating significant disruption and
changing business models across every industry and region:
artificial intelligence, the Internet of things, cloud computing
and mobile connectivity.
While electric vehicles account for only 0.2% of passenger,
light-duty vehicles, the number is forecast to surge in coming
years, providing a significant boost for semiconductors.
“EVs are an example where the mega digital themes are converging
and promise to be very disruptive,” said Denny Fish, Portfolio
Manager, Janus Henderson Global Technology Fund.
Companies can be organized in five categories along a digital
divide that separates those with the potential to thrive in the
online world and those with more limited upside. On the Right Side
are the drivers of digital disruption, such as large tech
platforms; on the Wrong Side are those facing structural
impediments to a transition to the digital economy, for example
brick-and-mortar retailers; in the Middle are those seeking to
transition to the digital economy, an example being Nike. The
Support group helps businesses to make the digital transition and
includes sectors such as cloud-based Software as a Service
providers; while on the Outside lie companies that are less
susceptible to digital disruption, such as home improvement
goods.
“Firms that are driving today’s digital disruption are often
large tech platforms that have built sustainable business models by
gathering vast sums of consumer data and employing that data to
roll out new digital tools and improve user experiences. This
creates a virtuous circle that becomes increasingly difficult to
compete against, especially when innovation is occurring rapidly,”
said Fish.
Emerging Market Debt: Differentiated
Opportunities More than 58% of global GDP now comes
from emerging markets, and emerging market companies tend to have
less leverage than their developed market counterparts, creating a
potential opportunity for growth in corporate debt issuance, while
EM companies are also expected to continue to strengthen their
balance sheets by extending debt maturities and refinancing bonds
at lower rates.
“Often, when you buy corporate bonds from
emerging markets, you are buying the debt of very solid companies —
they are just based in the ‘wrong’ postal code,” said Steve Drew,
Head of Emerging Market Credit.
About Janus Henderson Investors
Janus Henderson is a leading global active asset manager dedicated
to helping investors achieve long-term financial goals through a
broad range of investment solutions, including equities,
quantitative equities, fixed income, multi-asset and alternative
asset class strategies.
As at 30 September 2017, Janus Henderson had
approximately US$361 billion in assets under management, more than
2,000 employees and offices in 27 cities worldwide. Headquartered
in London, the company is listed on the New York Stock Exchange
(NYSE) and the Australian Securities Exchange (ASX).
Media enquiries:North America:Erin Passan, +1
303-394-7681erin.passan@janushenderson.com
EMEA:Angela Warburton, +44 (0) 20 7818
3010angela.warburton@janushenderson.com
Investing involves risk, including the possible
loss of principal and fluctuation of value.
Foreign securities are subject to additional
risks including currency fluctuations, political and economic
uncertainty, increased volatility, lower liquidity and differing
financial and information reporting standards, all of which are
magnified in emerging markets.
Janus Henderson is a trademark of Janus
Henderson Investors. © Janus Henderson Investors. The name
Janus Henderson Investors includes HGI Group Limited, Henderson
Global Investors (Brand Management) Sarl and Janus International
Holding LLC.
C-1217-14082 12-30-18
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