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Decline
Equity outlook: Guarded optimism

15-12-2023 · Quarterly outlook

Equity outlook: Guarded optimism

We look back on a remarkably strong year for global equity markets, which despite a hesitant start delivered close to 20% returns by mid-December. Our Global Stars, Emerging Markets and Asian equity strategies have been performing successfully, all well above benchmark and high up in their peer group rankings1.

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    Authors

  • Kees Verbaas - Global Head of Fundamental Equity

    Kees Verbaas

    Global Head of Fundamental Equity

  • Audrey Kaplan - Portfolio Manager

    Audrey Kaplan

    Portfolio Manager

  • Wim-Hein Pals - Head of Emerging Markets team

    Wim-Hein Pals

    Head of Emerging Markets team

Top keywords

Summary

  1. DM equity rally should broaden as the Fed pivots

  2. Earnings cycle set to drive EM equities

  3. Productivity growth and the energy transition are long term tailwinds

Macro developments and policy moves caused serious mood swings amongst investors in 2023. Worries about higher for longer inflation leading to a recession were traded for optimism about a soft landing towards the end of the year. We see Federal Reserve chairman Powell’s guidance that several rate cuts are on the cards for 2024 as a positive, as long as this is for the right reason. Namely that inflation is becoming under control, and not because the Fed knows something that the market doesn’t. We follow closely how the effect of higher interest rates is starting to come through in the real economy. Credit card delinquencies are rising rapidly in the US, the number of bankruptcies is creeping up, also in Europe, and few companies surprise positively on revenue growth. Data from the trucking sector, usually a good leading indicator of future economic activity in the US, also shows signs of weakness. This calls for caution, and we select stocks accordingly. 

At the same time, long term investors are seeing that tech advances are accelerating and increasingly driving productivity growth. We are now hitting the steeper part of the technology curve. The pace of change through the internet economy years of 1995 to 2020 may look sedate by comparison with the advances we are about to see in the next decade. In addition, the recent COP 28 in Dubai showed that the energy transition is still a powerful driver and will bring tremendous investment opportunities. These trends are reflected in our portfolios as well. 

Furthermore, we pound the table for emerging markets. In this Quarterly we discuss how we see many emerging markets benefiting from macroeconomic strength compared to the developed world, and from a strong position in key growth industries. Robeco’s emerging markets strategies offer multiple ways to initiate or calibrate exposure to benefit from a long-term rebalancing towards the world’s fastest growing economies.   

Thanks for reading, enjoy the end-of-year celebrations, and we look forward to catching up with you in 2024! 

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Footnote

1 Source: Morningstar, Robeco Performance Management

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Important information This disclaimer applies to any documents and the verbal or written comments of any person in presentations or webinars on this website and taken together is referred to herein as the “Information”. The services to which the Information relate are NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws and must not be relied or acted upon by any other persons. This Information does not constitute an offer to sell, or a solicitation of an offer to buy, any financial product, and may not be relied upon in connection with the purchase or sale of any financial product. You are cautioned against using this Information as the basis for making a decision to purchase any financial product. To the extent that you rely on the Information in connection with any investment decision, you do so at your own risk. The Information does not purport to be complete on any topic addressed. The Information may contain data or analysis prepared by third parties and no representation or warranty about the accuracy of such data or analysis is provided.
In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management UK Limited (“RIAM UK”) is authorised and regulated by the Financial Conduct Authority. RIAM UK, 30 Fenchurch Street, Part Level 8, London EC3M 3BD (FCA Reference No:1007814). The company is registered in England and Wales under Ref No. 15362605.

In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management B.V. is authorised as a manager of UCITS and AIFs by the Netherlands Authority for the Financial Markets and subject to limited regulation in the UK by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.