Richard Cayne Meyer states that Multi-managers believe the political stalemate in the U.S. could be a prime opportunity to buy more risk assets, although there is concern about the looming debt ceiling.
Last week, for the first time in 17 years, the U.S. government partially closed down after the Republicans refused to agree spending plans that included President Obama’s affordable health care scheme, despite the reforms already being signed into law. If Congress does not agree its budget soon, it will run out of money on 17 October unless its debt ceiling is raised.
JP Morgan Asset Management Fusion fund range lead manager Tony Lanning notes suggestions which estimate that for each week the government is closed, 0.12% of economic quarterly annualized growth is lost. A lot more than that will be affected comments Richard Cayne Meyer
Lanning says: “The debt ceiling and the impact of the shutdown could provide a meaningful opportunity to add more risk to our portfolios. So far markets have taken these events broadly in their stride.”
Fidelity Multi Asset Defensive fund manager Trevor Greetham remains bullish and believes when the smoke clears, investors will see an “equity-friendly backdrop.” He adds: “Any stock market weakness should present a buying opportunity.”
However Lanning views markets as being very complacent in regards to the debt ceiling. He says: “It seems to imply that investors have concluded that the ceiling will have to be raised, which it has been many times before.
”But were it not, several ratings agencies have said they will determine the U.S. is in default if it misses even one interest payment. The market has not priced this in.
Richard Cayne Meyer mentions that at Hargreaves Lansdown senior investment manager Adrian Lowcock says: “This does not look like a selling trigger. Investors should focus on their long-term goals and use any short term weakness as opportunities to invest.”
Meanwhile, it is the view of Fitch Ratings that global bonds, global equities and multi-asset funds will perform well in 2014 while other asset classes may suffer.
The ratings agency indicates improving investor confidence and an increasingly solid macro-economic background will support growth, but changing investor demand and intense market competition will cause uneven growth. Investors’ confidence will return to the markets when this issue is resolved but until then expect a few more days of volatility states Richard Cayne Meyer
Richard Cayne Meyer notes that while global funds are set to perform well, domestic equities and government bonds could struggle due to changing investor demand. Fitch Ratings Fund and Asset Manager Rating Group director Alastair Sewell says: “AUM in traditional asset classes such as domestic equities or government bonds are threatened by changing investor allocations.
”In particular, managers that have large AUM in government bonds or aggregate portfolios would suffer from rising interest rates.” Fitch also points to the fact that half of European managers saw no inflows in the first three years to end of July 2013, while the top 10 firms received 50% inflows to bonds and mixed asset funds and 75% of inflows into equity funds.
Richard Meyer Cayne born Montreal, Quebec Canada, has been a pioneer in the wealth management space in Asia catering to High Net Worth Individuals. Richard Meyer Cayne having first started his career in finance in the mid-90s in Tokyo Japan had opened the first firm Meyer Asset Management Ltd in Japan with a focus on offshore wealth solutions catering to High Net Worth Japanese clients.