The growing possibility of a right-wing government in France may have sent markets tumbling, but not everyone is reaching nervously for a Gauloises.
Robeco’s multi-asset team has closed their underweight position in Europe, believing the Eurozone will maintain its stability despite the concerns about the rise of populism in France and elsewhere.
Colin Graham, head of multi-asset, said the team was pleased with the continent’s cheap valuations and solid banking performance, and said they will be looking to take advantage of the volatility as the situation progresses.
Robeco contrasted this market with the “eye-wateringly high” valuations in areas like US equities, high-yield bonds and the dollar itself.
They’ve also made a couple of other portfolio changes that we’ve noted.
“We have closed our long commodities position as we saw moves that could not be reconciled with macro and political events,” said Graham. “Some of these pricing anomalies have closed and we are now waiting for oil to find a base, post the OPEC+ meetings.”
While small-caps have been all the rage among allocators at the moment, the folks at Robeco are unwilling to follow the crowd down the market cap scale.
“We still believe that small caps will struggle in the higher for longer interest rate environment, especially in the US,” he added.
This runs contrary to what many DFMs have been doing lately – Asset Allocator has covered the veritable raft of allocators taking small-cap positions in preparation for eventual rate cuts.
In fact, if you wanted a direct comparison to Robeco’s approach, then look no further than our recent chat with private bank Brown Shipley.
Chief investment officer Daniele Antonucci told us that he’s gone underweight in Europe after concern about the French elections. He also keeps a sizeable commodities position to shelter from geopolitical risk, and he also remains optimistic on the small-cap story.
Chacun à son goût, they say.
