None of the delegates in Munich believed a new market correction was likely to occur this year, in sharp contrast with the much more bearish outlook of their peers in Stockholm and Copenhagen. Quite to the contrary, two thirds of the audience believe markets may well gain 10% in the next three months. They said this on the day Mario Draghi hinted that QE 2 was being lined up.
When our researcher visited Munich in early September to gauge the local investment sentiment, local fund buyers already had high hopes of the effects of the ECB’s stimulatory policies, which made them stocking up on European equities. Since then, the ECB-president has only become more dovish in his tone, which culminated in his announcement last week that QE 2 is now a serious possibility.
The announcement has triggered a wave of bullishness with Munich’s fund selectors, as the majority of them believe the equity markets are going to profit from more QE (see chart below). They also have a very strong preference for value stocks.
Fund managers try to spoil the party
While fund selectors are already preparing for a QE-induced feast, fund managers presenting at the event were striking a cautious note. This wasn’t as surprising as it may seem though, since most of them manage multi-strategy funds. This sort of funds tend to be more in favour with investors who view the markets less favourably.
Jason Lejonvarn, an investment strategist at the BNY Mellon Dynamic Total Return team, thinks it’s a bit premature to talk about QE 2. “It’s probably a bit early to pronounce anything about the future of QE,” he said.
Chris Childs (pictured left), a multi-strategy manager at BMO Global Asset Management, also believes QE 2 is not on the cards. “I think the underlying macroeconomic data do not look bad, but reasonably supportive. Growth is not exciting, but not hugely problematic either. I don’t see a huge necessity to accelerate QE,” he said.
As Childs’s investment edge is in delivering absolute returns regardless of market direction, rather than anticipating the next monetary policy move, he is not a fan of policy tools like QE anyway. “I would rather never have seen a start to QE in the first place,” he confesses.
Click here to see a full overview of the event’s voting results.
And here you can find a slideshow of photos taken at Expert Investor Germany.