Fund Manager Grégoire Mivelaz cited in GAM’s Outlook 2019

ECB changing policy direction

Everyone has been waiting for the ECB to announce its first rate hike, which has now been postponed to 2019, specifically September 2019 according to the latest indications. Rising rates tend to be good for profits of financials and as we approach next September we expect investor attention to start to look favourably on the likelihood of improvement in balance sheet strength from such a move. This is particularly the case for those of the national champions we tend to favour. Since we are already positioned for rising rates, with about 50% weighting in our strategies invested in fixed to floaters and floating rate notes, we are aiming to benefit both from better credit metrics and a rising rate environment.

During 2018 the theme among investors has been one of de-risking. For 2019 we believe central banks will increasingly move towards quantitative tightening (QT). One question we are often asked is how this will affect us. QT is only tangential for us since there was no buying of financials via quantitative easing (QE), so there will be no direct unwinding in our areas.

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