(Corrects Robeco Investment Solution's assets under management
and company structure in paragraph 15)
By Jamie McGeever
LONDON, Sept 28 Investors following the stock
market maxim "Sell in May and go away" will be ruing that
decision this year, after emerging market, Japanese and euro
zone equities emerged as the biggest winners in the third
U.S. equities did less well but were still firmly into
There are signs that the coming quarters may not be as
robust, but for the third, the prospect of central banks keeping
the stimulus taps open for longer following Britain's shock
decision in June to leave the European Union boosted investors'
risk appetite and demand for higher-yielding assets like stocks.
The British pound extended its Brexit-driven losses against
the dollar, falling more than 3 percent.
Brent crude oil was the worst performing asset, down
more than 7 percent and giving back some of the second quarter's
30 percent gains. This caused commodities in general to fall
almost 5 percent.
A Reuters graphic -- reut.rs/2doKMRd -- tracking 23
markets across all geographical regions and asset classes shows
the divergence between stocks, which were the best performers,
and sterling and commodities, which were the worst.
Japanese and emerging market equities added just under 10
percent in the third quarter , in dollar terms,
and euro zone equities rose just under 6 percent.
U.S. stocks were up 3 percent
Investors drew comfort from the perception that markets
continue to have the implicit - and increasingly explicit -
backing of the world's major central banks.
The Bank of England cut interest rates to a new record low
and expanded its dormant quantitative easing bond buying
aerogramme in response to the Brexit vote. The Federal Reserve
held off U.S. raising rates, the Bank of Japan unveiled new easy
policy plans and expectations remained high that the European
Central Bank would ease policy further.
SEARCHING FOR YIELD
Sterling fell to its lowest in over 30 years against the
dollar shortly after the Brexit vote. It staged a mini revival
in August, but this week fell back below $1.30 within sight of
the July low just under $1.28.
The fall in stock market volatility paved the way for
higher equity prices. Bond market volatility was also anchored
for most of the three months to September, although bonds
struggled to replicate anything like their performance in the
"The third quarter was remarkably stable, which felt a
little unnatural. You can't expect that to continue," said Lukas
Daalder, Chief Investment Officer of Investment Solutions at
Robeco. Robeco is a subsidiary of Robeco Group, which has 269
billion euros in assets under management.
High yield bonds also performed well, up almost 5
percent over the quarter, as the increasingly difficult 'hunt
for yield' forced investors into the less liquid and riskier
areas of the investment universe.
The fourth quarter could be a lot more volatile thanks to a
deteriorating global economic environment, sluggish corporate
earnings and rising political uncertainty around the U.S.
presidential election in November.
Underlining that growing sense of unease and caution, HSBC's
asset allocation team earlier this month put 17 percent of its
portfolio into cash, a high number in its own right but
especially high considering it was previously zero.
And according to Bank of America Merrill Lynch, investors
have poured $158 billion into bond funds this year and pulled
$138 billion out of equity funds, a sizeable redemption entirely
down to the $143 billion withdrawn from developed market stock
That said, if markets lurch too low too quickly for whatever
reason, investors will no doubt be hoping that the familiar
cavalry rides to their rescue once again.
"Central banks seem to be losing credibility, but everyone
still looks to the central banks. And ultimately, you should
never underestimate the power of the central banks, because in
the end they can buy everything," said Robeco's Daalder.
($1 = 0.8927 euros)
(Reporting by Jamie McGeever; Graphic by Vikram Subhedar;
Editing by Jeremy Gaunt)