Sección del Observatorio Inverco con informes de mercado de las gestoras de fondos de inversión. Threadneedle Investments. Perspectivas y visión general de los mercados en 2013. Diciembre 2012.pdf

1. December 2012
Outlook 2013: Opportunities on the bumpy road to recovery
 Financial markets will continue to be affected by macroeconomic uncertainties in
2013, but some of the extreme outcomes that investors feared in 2012 are now
less of a concern than they were a year ago.
 Interest rates will remain low indefinitely and the search for yield will continue.
However, fixed income investors should not expect a re-run of the easy ride they
Mark Burgess had in 2012 – active management will play an important role in 2013 given the
Chief Investment strong returns from many fixed income assets over the past 12 months.
Officer
 In a low growth world, we expect strong companies to get stronger. Businesses
that can deliver sustainable growth should be able to command premium
valuations, given that overall rates of economic growth will remain subdued.
Government balance sheets are likely to remain under pressure, and investors will
continue to question the sustainability of AAA sovereign credit ratings in the
developed world.
Leigh Harrison
Head of Equities The past year has been another challenging period for many investors due to ongoing
economic problems in the developed world, although positive returns from global equities
and corporate credit over 2012 to date remind us once more that there is no strongly
positive correlation between the returns from risk assets and GDP growth, at least not in
the short term. Returns from government bonds have been significantly more modest,
although the asset class has been supported by the distortions arising from quantitative
easing (QE) and yields have remained close to historic lows.
Jim Cielinski Looking to 2013, the overall environment is one of uncertainty although some of the risks
Head of Fixed Income
that were significant headwinds in 2012 – such as the Chinese leadership transition and a
complete disintegration of the eurozone – are perhaps less concerning for markets than
they were a year ago. Moreover, in the eurozone, there is now at least a recognition that
very tough decisions lie ahead – as a number of European politicians have indicated, they
all know what to do to address the debt crisis, but don’t know how to get re-elected if they
do it.
We have held a very cautious view of the global economic environment for some time,
and events over the past year have proved our caution to be well founded. We continue to
expect that the economic outlook will remain challenging in 2013 and the overhang of debt
will cast a heavy shadow for an extended period. For this reason, in many of our portfolios
we remain cautious on companies that are heavily reliant on government spending. In the
US, we expect GDP growth of around 1.5% in 2013, while the eurozone is likely to remain
in recession, with GDP contracting by 0.5%. Japan is likely to see a slowdown in growth to
0.7% in 2013, while the UK will see a modest recovery in GDP growth to 1% for 2013.
Growth in the emerging world will be considerably better, although the rebalancing of
China’s economy is likely to result in GDP growth of just below 8%.
On a more positive note, we believe there may be some grounds for expecting some
improvement in macro data in the near future. In the US, there have been a number of
better-than-expected data releases recently, and the housing market appears to be
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2. showing a useful recovery, even before any beneficial impact from the Federal Reserve’s
third round of QE. While the earlier uncertainty over the outcome of the US presidential
election has now been resolved, and President Obama is back in the White House, the
fiscal cliff continues to cause concern and has led to the postponement of corporate
capital expenditure. This is a worry because it has a knock-on impact on job creation and
economic activity.
We expect more details of measures to tackle the fiscal cliff shortly, and this may release
some pent-up demand in the more predictable environment that should follow. Moreover,
while politicians may be slow in coming to an agreement over the fiscal cliff, our US
equities team believes it is very unlikely that lawmakers will actively try to legislate another
recession.
Meanwhile, the news from China shows signs of the economic slowdown having
bottomed, which is a clear plus for equity markets and risk assets generally, as the
emerging world remains the primary motor of global economic growth. The latest official
purchasing managers’ indices in China have been above the crucial 50 level (the level
that separates expansion from contraction), and the recent destocking phase appears to
be largely over. In addition, the leadership transition is now in progress and some further
policy stimulus could be on the cards in 2013.
At the corporate level, we have generally lower than consensus forecasts for corporate
earnings growth in 2013. The most recent US reporting season (Q3 2012) has been a
fairly mixed one, with a higher percentage of disappointments than we have seen for
some time, although the pace of downgrades to forecasts appears to have slowed. The
scope for earnings to disappoint even as macroeconomic tail risks appear to be abating
highlights, in our view, the importance of making the right stock selection calls, as well as
investing in the most appropriate blend of assets for a given risk/return target. The easing
of tail risks in Europe and China leads us to be more positive on equities than we have
been for some time, but there will be bumps in the road as stock markets react to the
latest policy initiatives and developments. At a micro level, we expect the strong to
continue to get stronger in the equity space and M&A activity is likely to remain an
important driver in a number of markets as companies put their excess cash to work.
In fixed income, we continue to question the appeal of so-called safe haven core
government bonds such as UK gilts and German bunds – yields remain at historically low
levels (and are particularly unattractive in real terms) – and the risk of capital losses down
the road is significant. The US treasury market faces similar concerns, although the
continuation of QE by the Fed means that yields are unlikely to balloon in the short term.
Higher-yielding areas of fixed income such as emerging market debt and high yield look
more appealing to us, although strong returns from these asset classes over 2012 to date
and significant spread tightening mean that it is much more difficult to make a strong
valuation case for these areas than it was a year ago.
Alternative assets are likely to remain popular for investors who are uncomfortable with
the volatility that is inherent in equity investing, although we are cautious on UK
commercial property as demand remains weak outside of the ‘super prime’ sectors such
as West London offices. In commercial property markets, we expect income to be the
primary driver of total returns as occupational markets remain weak and the problems in
sectors such as UK retail are well known, with a number of household names going to the
wall over the past year.
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3. We expect commodity markets to be pulled in different directions in 2013, with the latest
round of QE most likely to benefit precious metals. We see tight supply conditions in the
oil market, and a shock to production cannot be ruled out given Middle East tensions.
However, buoyant agricultural markets should lead to heavy planting, which may limit
future gains. Furthermore, the sluggish global economy and the shift in China from
investment-led growth towards greater emphasis on consumption are negative for
industrial metals. However, even with these caveats, commodities are likely to remain
very popular with investors looking for a hedge against the longer-term inflation risks
posed by QE. Moreover, commodities can provide significant diversification benefits when
incorporated as part of a multi-asset portfolio.
Investors head into 2013 knowing that few of the fundamental economic problems in the
developed world have been solved – and many of them could remain unresolved at the
end of 2013. However, as 2012 has shown, a situation which improves from horrible to
bad is one in which astute investors can generate attractive returns from risk assets.
Investment themes for 2013
Will the search for yield become a stretch?
At first glance, it might appear as if little has changed in core government bond markets –
yields are at historically low levels (with real yields in negative territory in some cases) and
doubts remain over the long-term viability of the eurozone. But while these themes are as
relevant today as they were a year ago, the forces behind them, and indeed market
valuations, have changed considerably. The search for yield, for example, is turning into a
scramble, while the pressures of austerity bearing down on eurozone peripherals such as
Greece, Spain and Portugal are finally being offset by some support from policymakers –
so much so in fact that it has been possible to make significant money from the tightening
of peripheral spreads in recent months.
We believe there will also be one other critical difference between this year and next. In
2012, fixed income investors have enjoyed a relatively easy ride with all areas delivering
robust and, in some cases, spectacular returns. By contrast, successful active
management is likely to be a more significant determinant of returns in 2013 as valuation
concerns could provide headwinds for a number of fixed income markets. In short, it will
not be so easy to make money in fixed income in 2013 as it was in 2012.
In the equities space, shares in large-cap, high-yielding companies with strong balance
sheets, robust cash flow generation and proven capital allocation strategies are also likely
to remain in demand, particularly as the shares in such companies often provide a higher
yield than their bonds.
In emerging market sovereign debt, there will be an increasing realisation that certain
sovereign issuers are more deserving of safe haven status than developed peers.
Typically, emerging market economies are characterised by superior growth, relatively low
debt and high FX reserves. Turkey’s recent upgrade to investment-grade status by Fitch is
one indicator of how far the emerging economies have come. Emerging market corporate
bonds can also provide a useful pick up in yield for investors and in most instances the
issuers are supported by the discernibly better economic fundamentals than those
prevailing in the developed world. However, there is likely to be a limit to how much further
emerging market spreads can tighten in 2013, given current levels.
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4. UK commercial property continues to offer a decent pick up in yield over gilts but overall
demand for the sector remains weak and significant refinancing needs to be undertaken.
In this environment, property funds focusing on sustainable but higher-than-average yields
and possessing the firepower to take advantage of distressed valuations should be well
placed.
Survival of the fittest
In terms of equities, we continue to expect the strong to get stronger in 2013. Poor
management, flawed business models and weak franchises are very likely to struggle in
the tough economic environment, while proven management teams with strong franchises
should prosper. Many of these quality companies are inexpensively valued, affording them
significant scope to outperform. Examples of strength include:
Nestlé – an exceptionally strong balance sheet, a high yield and category-leading
products in a relatively defensive sector, with good exposure to emerging market growth.
Reed Elsevier – this high-quality media company has high returns, exceptional cash
generation and a strong dividend. The current valuation does not fully reflect this and we
believe that its well-regarded, relatively new management team should continue to deliver
and ultimately create value for shareholders.
Marks & Spencer – we estimate that M&S will have a double-digit free cash flow yield in a
few years’ time. Unlike many retailers, M&S is not reliant on attracting younger shoppers
to drive growth – a clear positive given that the younger demographic groups have been
hit hardest in the recession.
Cobham – Defence stocks generally have suffered due to concerns over government
spending cuts. However, even in a worst-case scenario, Cobham’s margins should remain
healthy and it is likely to take a bigger slice of defence budgets as its applications take
market share from rivals.
Growth in a low-growth world
We continue to favour companies that offer growth in a low-growth world. These include:
 Companies selling into emerging markets, such as VW in Europe.
 Businesses with access to a secular theme such as the provision of cost-effective
healthcare services to ageing populations – for example, DaVita of the US.
 Companies with superior products or intellectual property that should help to
cushion them from the economic cycle, such as Apple.
No such thing as a safe haven
The sustainability of AAA sovereign credit ratings in the developed world will remain a
source of consternation in 2013, both for the ratings agencies and investors. The potential
for further gains from core government bonds is limited and the risk of loss is significant,
given that yields have a very long way to rise before they return to long-term averages. In
this environment:
 Investors seeking low risk assets will have to look beyond core government bonds.
 Absolute return approaches are likely to remain popular.
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5. Commodities – Stay selective
A selective approach is likely to remain important in 2013. Commodities where supply
dynamics are tight, such as oil and related products, should offer better prospects than
areas that are tied to the strength of the global economy (such as industrial metals). Oil
and related products also provide useful protection against any supply shocks or political
concerns in the Middle East, as Saudi Arabia continues to play the key role in balancing
global oil markets. Shale gas is likely to remain an important theme in the US – indeed
some have already dubbed the US ‘Saudi America’ – but shale gas cannot be exported,
so this will be a domestic US story.
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