The impact of slumping commodity prices coupled with an improving consumer outlook is likely to be as dominant in 2016 as it was over the past 12 months.
In an end-of-year update, Eiswert said he expects continued hardship for investors in 2016 due to the meek global growth outlook. Over the course of 2015, the US-based manager said he was 'owning fewer names than ever' in response to the current market.
‘Over the past year, the global equity story has been a tale of two markets: for many consumer and commodity-consuming sectors, 2015 offered, if not the best of times, at least a relatively supportive economic environment.’
He added: ‘For industrial and commodity-producing sectors, however, it was a year of slumping demand and declining profits. In our view, these stories are unlikely to change directionally in 2016.’
Meanwhile, the growth-focused manager said there was a sharp divergence between growth and value strategies in 2015 following several years of close tracking between the two. Again, he expects this to continue.
‘A quick reversal of this style divergence is unlikely, in our judgement, barring a substantial acceleration in global economic growth and a recovery in commodity prices. Neither is likely before the second half of 2016 - or even the first half of 2017,’ he said.
Despite these headwinds and the potential impact of further volatility, Eiswert said there were reasons for optimism in the market, particularly for stock pickers.
‘Global merger and acquisition (M&A) boom is constricting the supply of public equities, as are heavy corporate share buybacks. We see both trends continuing, and perhaps even accelerating, in 2016 as companies try to lock in attractive funding costs,’ he said.
‘Also, year-over-year earnings comparisons should grow less onerous for many industrial and energy-related companies as we move into the second half of 2016—assuming commodity prices and exchange rates stabilise around current levels.’
Elsewhere, Eiswert believes low energy prices, employment and income growth and the strong impact of the US dollar should boost consumer spending. He said this would offset the weakness of industrial demand currently being experienced.
The T Rowe Global Focused Growth Equity returned 51.1% in the three years to the end of November 2015. This compares to a rise of 48.7% by its Citywire-assigned benchmark, the MSCI AC World TR USD, over the same period.