LONDON (Reuters) - Markets have turned a corner and it is time to cautiously acquire riskier assets, NN Investment Partners’ chief investment officer said on Tuesday, but he warned investors should not expect social pressures and geopolitical risk to fade away.
Recession fears have haunted markets in recent months, but the mood has brightened in the past few days on hopes for a U.S.-China trade deal and data indicating the downturn in tariff-hit manufacturing sentiment may have troughed.
Valentijn van Nieuwenhuijzen, who helps to manage 240 billion euros ($266 billion), said that risks surrounding Britain’s exit from the European Union may have moved to the back burner, but tensions lingered elsewhere.
“I don’t see a scenario where these risks really fade away,” he told Reuters. “The social tension that you see almost everywhere, if you look around the world - it’s very difficult to find regions where it’s not the case.”
Nonetheless, NN IP had recently dialed back on its defensive allocations, trimming a bond overweight and adding equities, especially European, Japanese, and financial-services shares. But he said it was too early to pile into emerging markets.
“I don’t think it will be ... a V-shaped recovery – it’s too early for that – but it might be that we are moving in a cyclical or sideways or have a bit of temporary upturn there.”
Governments loosening their purse strings could accelerate a recovery, said van Nieuwenhuijzen.
“The crucial swing factor here will be the fiscal policy antennae,” he said. “There’s pressure building that fiscal policy needs to be used more. I think it’s whether its France or the Netherlands, a combination of addressing certain challenges around climate change or general infrastructure challenges - we will see and hear more about it.”
+ Van Nieuwenhuijzen said that 66% of NN IP’s assets under management were ESG integrated. Investments in some areas were excluded, such as tobacco or coal, he added. “Yet we believe you can achieve more by engagement and dialogue and by rewarding positive change in the way you construct your portfolio.”
+ NN IP’s base case for the UK’s December elections was that incumbent Boris Johnson would win and would get a form of Brexit done. While “comforting for markets”, that would still be “creating a lot of uncertainty” for the economy over the next five to 10 years, reflected in risk premium and lower trend growth, and have consequences for the overall economic backdrop and social backdrop.
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Reporting by Karin Strohecker, aditional reporting by Elizabeth Howcroft