Amid persistent rumours that he is about to mount a re-entry into the Australian ratings and research market, Stephen van Eyk has emerged as the most prescient forecaster of market events in 2018.
Asked by Money Management in January to be part of its Investment Analyst Forecast Forum, a review of the predictions made by van Eyk, Premium China Fund’s Jonathan Wu and Insight Investment’s Adam Kibble it was van Eyk who emerged as the most accurate forecaster with his call that markets would turn volatile in September and October.
Van Eyk made four main points in the Money Management webinar;
- That global stock markets were overvalued in the long-term and were over-brought in the short-term with investors gambling on strong earnings per share growth continuing.
- Economic growth was likely to decline
- Bond fund were vulnerable to rising spreads as liquidity would become scarce as the Federal Reserve reduced its balance sheet.
- The $US would rise as less capital flowed form the US to overseas – something which would see a decline in the $A against the $US.
He concluded that:
- Bond funds are vulnerable to increasing spreads and rising rates in early 2018.
- Global stock markets are over-valued relying on future growth.
- Although the Chinese authorities are cutting back on credit to corporates, reducing output, imports will continue to rise creating global growth.
- Australia will suffer from reduced demand for commodities.
- Asian emerging markets will continue to provide the best avenue to access this growth.
- Global markets will suffer a setback in 2018 – if it’s early, it shouldn’t be too bad. It it’s later, it could be significant.
In a September review of his January forecast delivered to Money Management’s Future of Wealth Management Conference van Eyk offered conclusions with respect to portfolio adjustments.
- Buy $US ETFs / gold ETFs
- Buy some low geared long/short funds – suited by volatility
- Reduce higher risk bond funds – rising spreads
- Reduce banks
- Reduce growth funds and add some value orientation
- Reduce emerging markets
- There may be a few slides down the mountain to come in October 2018 – at some time they will join – 2019?
