While US is grabbing the headlines as the hedge fund hotels and momentum darlings of the last 10 years have suddenly collapsed, European markets have been a bloodbath longer and that pain is accelerating rapidly…
As Bloomberg reports, The sell-off in European stocks has been so violent that Guillermo Hernandez Sampere, head of trading at the German asset manager MPPM EK, now spends half his working day on the phone with fearful clients.
“So much pain, the market is killing us,” he said by phone from Eppstein, Germany.
“European equities have lost investor confidence due to Italy, Brexit. Liquidity is the place to be right now.”
Italy and Germany are the worst performers year-to-date…
Hernandez Sampere said it’s best to hide from the European equity correction by holding cash, and the fund has increased its cash positioning to the “high single-digits” in November even though it’s normally fully invested.
He is not alone – a slew of institutional investors are issuing ominous warnings:
Goldman Sachs strategists recommend that mixed-asset investors lift their cash allocations and dial back on risk.
Ken Adams, head of tactical asset allocation at Aberdeen Standard Investments says: “You need a catalyst to trigger buying in European stocks and it’s hard to come up with a story investors can believe in… The region has disappointed in terms of growth expectations and the general political backdrop is challenging.”
And this is happening as Italian bank credit risk explodes…
And Italian redenomination risk (Italeave) soars…
We give the last words to Hernandez Sampere:
“It’s very sad because some shares really look so sexy from a fundamental view,”
“But only a few people give us the money to invest here, the majority of institutional clients redeem.”
But what about the global synchronized recovery?
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