Avoiding the herd
At times, it feels that few share my view of markets. It is during these periods that I feel it is most important to call out herd behaviour – something that tends to increase during episodes of mass fear.
This phenomenon is clear in today’s atmosphere of unprecedented uncertainty. The relationship between growth and value is undoubtedly stretched and some valuations appear to be in – or are heading towards – bubble territory. Meanwhile, central banks are manipulating markets with injections of liquidity, which makes determining the immediate direction of travel very difficult.
There is no doubt that the technical environment is an excellent one for credit. There is little-to-no yield to be found in developed-market sovereign debt, equity income is challenged, and credit spreads remain wider than their historical averages. We have a less positive view on fundamentals, which in some respects are weaker than they have been for a decade.
Going forward, we will take an active, conservative approach to credit investing that uses detailed, bottom-up analysis – something we believe will help us seek out the opportunities that are so often overlooked by those that follow the herd.