Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a1114592

Chatfeild-Roberts: it's downhill from here for markets

Jupiter Merlin multi-asset head John Chatfeild-Roberts explains why challenging market conditions are likely to lie ahead.

 
Chatfeild-Roberts: it's downhill from here for markets
 

John Chatfeild-Roberts, Citywire A-rated manager of Jupiter’s multi-asset Merlin fund range, believes markets reached a peak on 26 January. As a result, he says investors must brace themselves for tougher times ahead.

His comments follow a volatile period for markets, caused by investor concerns about the implications of a more hawkish chairman of the Federal Reserve and the pace of so-called ‘quantitative tightening’. This phrase refers to the withdrawal of 'quantiative easing' or money printing.

In Chatfeild-Roberts’ opinion, there are three reasons why markets peaked on 26 January 2018. The first is the upwards trajectory of interest rates in the US, a trend which could have a significant effect on markets and the global economy.

‘We see this [US interest rates rises] carrying on for some time,’ he added.

Secondly, the fund manager points to the reversal of quantitative easing and the shrinking of the Federal Reserve’s balance sheet, which will withdraw a key source of support for risk assets, such as shares and bonds.

Valuation fears

The final factor to consider is valuation, according to Chatfeild-Roberts (pictured).

‘You only have to look at the growth part of the indices to see that they are probably overvalued - and if you look at growth versus value in the US, the differential is back to where it was roughly in 2000,’ he says.

This date marks the height of the tech boom, where share prices of many technology and internet companies became completely disconnected from traditional valuation metrics, like the price-to-earnings ratio. However, from 2000 onwards, the bubble started to burst and the share prices of these companies plummeted. Cisco, for example, fell 86%.

Chatfeild-Roberts views the elevated valuations of growth-focused companies as a warning sign that trouble may lie ahead for markets.

‘Generally speaking we are positioned for tougher times,’ he added.

Brace yourself for more volatility

His sentiments are echoed by Ariel Bezalel, Jupiter Strategic Bond manager. ‘It feels like risk assets have seen their best days,' he said.

Bezalel described the sharp rise in market volatility in February as a ‘rehearsal for what we are going to see during the second half of this year’.

‘That is when the pace of quantitative tightening and the reduction of the Federal Reserve’s balance sheet goes into overdrive. In conjunction with that, they still want to raise interest rates in time,’ he said.

However, he believes it will prove difficult for the Federal Reserve to raise interest rates two to three times this year and do the same next year, at a time when they are shrinking their balance sheet.

1 comment so far. Why not have your say?

Tyrion Lannister

Apr 27, 2018 at 22:46

The doom mongers have been dishing out the same sort of negative hype for over 2 years. They will be right someday and then it’ll be “told you so”.

Then in 10 years or so a “news” story will start along the lines, “Mr Doom, who correctly predicted the crash in 20xx, believes markets are grossly over valued....”

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts


In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

More about this:

Look up the funds

  • Jupiter Strategic Bond
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Ariel Bezalel
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • John Chatfeild-Roberts
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Archive

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Read more...

Charles Stanley drops Woodford from fund buy list

by Daniel Grote on May 22, 2018 at 10:57

Sorry, this link is not
quite ready yet