Global markets enter new cycle

Global equity markets are turning towards the start of a new cycle, says Goldman Sachs Asset Management co-head of global equity Andrew Orchard.

“We believe markets are coming to the end of one cycle and just starting a new one,’ he says. “In February this year, we believe the turn was starting, so we have been buying cyclical companies such as tour operators and we are strong in technical equities.”

Among the fund manager’s top 10 investment performers have been Viacom, France Telecom and Deutsche Telekom.

A clue to this change was the volatility of the markets, Orchard says. Goldman Sachs cannot remember such a wild period of volatility in its 133 years of operation, he added. But driving this volatility is the move to globalisation in investing, Orchard says.

“The correlation of sectors across markets is increasing,” he says. “This is resulting in sectors becoming more important than countries in driving global share price performance.”

With volatility also comes risk and Goldman Sachs has an independent line of reporting.

“It is about maximising risk for high returns,” he says. “If we don’t have a strong view about a stock we don’t take the risk.”

The manager will keep its neutral style of management and will focus stock selection on a global perspective.

Goldman Sachs has six global research teams which are aligned by both region and industry. Global companies re analysed by global sector teams and local operations by the regional research teams.

“The research cycle generates ideas through fundamental analysis,” Orchard says. “This is backed up with global due diligence and establish a global research view. The final stage is to evaluate portfolio postures over time.”

“To be a global manager today, you have to do the research on a global basis. This has never been so important.”