As central banks around the world start to unwind their ultra-easy monetary policies, some of the rules-based, smart-beta strategies that have performed well over the past several years will be stressed, said Brian Singer, CFA, head of William Blair’s Dynamic Allocation Strategies team, on a recent CNBC “Street Signs Europe” interview.
The market has been buoyed by these central bank activities, which manipulate asset prices, but these rules-based strategies are “now coming up against that free ride,” Singer said.
He highlighted that this environment has been challenging for fundamental investors because fundamentals have struggled to exert themselves in the market. Singer said the key for fundamental investors is to not take too much risk in this environment.
“But as we see it unwind, we will step into those fundamentals and step against some of those rules-based, smart beta strategies,” he said.
In the CNBC interview, Singer also discussed how fundamentals are more attractive in Europe and especially in emerging markets compared to the U.S. market. The U.S. market, which is viewed as a safe haven, has increasingly attracted more assets and has gotten extended relative to other markets.
“Everyone calls it the most anticipated bear market in the history of the U.S.,” Singer told CNBC. “However, I think it is something that has run its course.”
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