Mazars Wealth Management Investment Newsletter - Winter 2020
Mazars Wealth Management Investment Newsletter – Winter 2020
Thu 16 Jan 2020
Read our full MWM Investment Newsletter Winter 2020
Following a flat third quarter, global equities rallied to the end of the year with the MSCI World index up over 7%. Returns for unhedged Sterling based investors were broadly flat as the Pound strengthened following the Conservatives’ decisive general election victory. The late final rally was primarily driven by renewed optimism for a ‘phase one’ trade deal between the US and China, and left global equities up 25% for the year. It is of course important to note that, by contrast, markets ended 2018 in very pessimistic mood, and therefore a global equity return figure of around 8% from September 2018 is a more useful measure of equity returns.
Trade deals (or not) aside, it is indisputable that the real driver for these spectacular returns was the Fed’s complete U-turn on interest rate policy. This turnaround, together with the continued loose monetary policy still adopted by the world’s other major central banks set the environment for equity price inflation as yields on ‘safer’ asset classes once again became unattractive.
Thus 2019 ended with equities looking ‘expensive’ once more. Economic fundamentals played no part in this stock market reflation, as what growth we saw was paltry at best, and leading indicators of future economic activity gave no reason for optimism. Investors once more find themselves forced into buying equities despite a lack of corporate profit growth. Some days this feels uncomfortable, but thanks to the stance of central banks this discomfort can be easy to ignore.
And so to Brexit. Whatever one’s view of the merits or otherwise of leaving the EU, it is difficult to argue with the notion that the malaise which Parliament has been in over the last three years has not been helpful for the UK economy. Some commentators had posited that a large majority might mean the possibility of a softer Brexit, but Johnson’s decision to put a hard deadline on the date of leaving might indicate otherwise. Much has been made of the normal timescales for a trade negotiation, but what is at stake, and indeed the starting position, mean that this negotiation is far from normal.
Although uncertainty remains over the direction of Brexit, our Investment Committee decided that the definitive outcome of the election is likely to spur greater investment, making UK equities a more attractive proposition at current valuations. As such we have initiated a position in UK small-cap equities, moving marginally overweight equities as a whole, reducing cash and gold where we have been overweight. The decision was also taken to switch from index-linked gilts, which have performed extremely strongly in recent years, and instead purchase conventional gilts.
I hope you find this newsletter interesting and relevant to you, and I would very much welcome any feedback you may have. Please do feel free to get in touch with your thoughts either by phone on 020 7063 4259, or by email on david.baker@mazars.co.uk.
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Why are investors paying to lend to governments?
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Weekly Market Update: Stocks rebound as US-Iran fears fade
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Weekly Market Update: Sterling continues to depreciate, global yields
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Weekly Market Update: Bond yields rise, Pound rallies on potential Brexit “pathway”
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WEEKLY MARKET UPDATE: EQUITY STRENGTH DESPITE WEAK DATA
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Risks are climbing, so let’s buy…stocks?
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Weekly Market Update: Nobody Wants Your Oil
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Investment Team Holiday Reading List
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Market Comment- Storm in a (bond) Teacup
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Weekly Market Overview – US jobs report eases inflation fears
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Weekly Market Update: US equities near all time highs as earning beat expectations
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Monthly Market Outlook: May 2018
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Monthly Market Update, June: Volatile Europe
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Monthly Market Outlook: March 2018
Read our Monthly Market Update February saw the return of volatility for stocks after nearly two years, as a confluence of catalysts affected equity markets: US Bond yields breaking critical levels above 2.55%, a new more hawkish and uncertain Fed, the deterioration of the global trade climate and renewed political uncertainty in Europe and the UK. […]
Weekly Market Update: Markets fall after record low US GDP data
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Why it pays to be a long term investor
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Quarterly Outlook: Sustainomics and a world without QE
2022 is the year where QE (conceivably) ends, and a decade-long Sustainability theme begins. Read our annual outlook.
Weekly Market Update: Stocks ended the week near all time highs
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Monthly Market Outlook: February 2018
Read our Monthly Market Update Global equity markets were positive again, registering a 5.3% performance in January, benefiting from the positive sentiment and the passing of the US tax reform at the end of 2017. The macroeconomic environment was less supportive, however, as some key indicators suggested that global economic momentum was slowing down in […]
Weekly Market Overview – Recovery continues despite rates normalisation talk by Fed
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Are UK risk assets pricing in the possibility of political realignment?
UK assets continue to trade at a discount to the rest of the world, however, with so much political uncertainty facing the UK this may be justified. Boris Johnson’s new special adviser Dominic Cummings is by all means unorthodox. Mr. Cummings was the Campaign Director for Vote Leave in 2016, and used machine learning and data […]
Weekly Market Overview – Despite US assurances, trade war fears still weigh on markets
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Weekly Market Update: Stocks sink as the Fed disappoints traders
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Are higher interest rates a necessary evil?
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.” Laurence J. Peter When I was studying economics at university (not that long ago) I was taught under ‘neo-classical’ thinking, which had come to pre-eminence in response to the period of ‘stagflation’ in the 1970s. Under stagflation […]
Weekly Market Update: Yield curve inversion spooks markets
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Weekly Market Overview – Trade war concerns weigh on markets
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Weekly Market Overview – Despite scheduled talks, looming trade war roils markets
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Reflections in Inflections: Our Q3 Economic Outlook
After a decade of unprecedented monetary stimulus, we have failed to see global growth rates anywhere near their pre-crisis levels. At the same time, however, we have not seen a recession. The world seems to be ‘chugging along’ as output is pressured on all sides. So is it the Fed that killed economic cycles? Read our […]
Weekly Market Update: Markets rally, Tesla delisting cancelled
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Gender pay and the changing face of the workforce
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How British retailers “gamed” themselves into a corner
When my daughter was first born she had trouble sleeping and hated her cradle. So I used to hold her by to the kitchen fan (new parents take note, this works!) for about 10’, until she was fast asleep. It worked magic every time. Until it didn’t. A few weeks later she didn’t like it […]
Weekly Market Overview – Markets shrug off US strikes on Syria
Markets were volatile last week due to the possibility of air strikes on Syria, however opened slightly up on Monday morning after the US took action over the weekend. Equity markets were positive across the board in local terms last week, however Emerging Market and Japanese equities posted losses in GBP terms as the Pound […]
Weekly Market Update: China concerns see market volatility
Read our full Market Update Week 50 Market Update Last week the main driver for UK investor returns was the weakness in Sterling, which fell -1.1% vs USD and -0.5% vs EUR. The majority of the drop came on Friday as Theresa May’s inability to win concessions from the EU created further uncertainty about the future […]
Monthly Market Update – December 2018
Read our full Monthly Market Update December 2018 November data indicated that the global economy continues to slow, despite a pick up in the services sector, as trade conditions deteriorate. Risk asset divergence, a theme of the previous quarter, seems to have abated, as US risk asset underperformance closed part of the gap with Europe and […]
Weekly Market Update: Equities sell off on renewed trade war fears
Read our full Market Update Week 49 Market Update US equities sold off significantly last week, down -4.4% in Sterling terms, as trade war concerns weighed on American stocks, erasing the gains made in the previous week. Global equities were down -3.5% in Sterling terms, with all sectors apart from utilities experiencing negative returns. Emerging Market […]
Mazars Quarterly Investment Outlook: Mind The Liquidity
Read our full Mazars Quarterly Investment Outlook-Mind the liquidity A cautionary tale There’s an old story about a man who was marooned on a deserted island. Searching for food and water, he instead found a cave hiding a chest of pirate treasure. No water in sight though. He spent his last few days, next to […]
Weekly Market Update: Oil prices fall and Tech leads US equities lower
Read our full Market Update Week 47 Market Update Equities fell across the globe last week, with the US suffering the largest decline as technology mega-caps sold off. Facebook is down over 25% year-to-date, suffering from both idiosyncratic factors, such as an ageing user base and political scandals, and sector specific issues such as regulation. Emerging […]
Weekly Market Update: US Equities continue their rebound, oil enters bear market and Democrats win the House
Read our full Market Update Week 45 Market Update US stocks continued their rebound this week, with energy and financials sectors up +1.4% and +1.5%, while the tech sector suffered as Amazon and Apple saw big falls. General Electric also fell to it lowest level since the GFC. Emerging Market equities were down -2.4% in Sterling […]
Weekly Market Update: US sanctions further Turkish instability
Read our full Market Update Week 32 Market Update As the pound continued its decline into last week, in local terms equity markets fell across the board aside from UK equities which made a +0.6% return. In Sterling all markets were up bar European equities, with US and global equities gaining the most with +1.9% […]
Mazars Quarterly Investment Outlook: Whatever Happened to the Global Synchronised Cycle?
Read our full Mazars Quarterly Investment Outlook – Q4 2018 Global Divergence In an early 2010 report Morgan Stanley warned that the biggest consequence of the 2008 global financial crisis could be isolationism and the reversal of a 50 year old trend which saw increasingly open borders, open trade and freedom of movement. As each […]
Monthly Market Update – October 2018
Read our full Monthly Market Update October 2018 September data continued to indicate global economic and risk asset divergence, consistent with a mature economic cycle, with USD assets rising as a result of Mr. Trump’s policies. The global economy is also diverging, with the US on a faster expansion path, while Europe and EM are […]
Weekly Market Update: Global equities decline as trade war escalates
Read our Full Market Update Week 34 Market Analysis Last week equities continued to decline, both in local and Sterling terms. Emerging Markets led the decline, falling -1.5% in Sterling terms. US, UK and Japanese stocks fell -0.9%, -0.2% and -0.9% respectively. European stocks were flat in Sterling terms. Globally, the best performing sectors were […]
Weekly Market Update: US growth powered by strong retail sales
Read our full Market Update Week 33 Market Update Returns were mixed for equities in local terms as, aside from US equities which made a +0.7% return, all major regions fell. Similarly in Sterling all markets were down bar US and global equities which gained +0.8% and +0.1% respectively. Both European and Japanese markets returned […]
Weekly Market Update: US treasury yields hit 7-year highs; European risk renewed
Read our full Market Update Week 40 Market Update US indices ended the week lower, with S&P 500 holding up more compared to the technology rich Nasdaq, as giants such as Amazon slipped. Financials stocks performed well given rising yields. The US 10-year Treasury yield closed the week at 3.23%, a 7-year high. UK stocks […]
Inflation momentum will recede. But prices may remain elevated.
There’s a strong possibility we may see the end of the episode soon. But supply chains could take long to mend and overall price levels could remain elevated versus pre-pandemic numbers.
Weekly Market Update: Sterling depreciates as no-deal probability increases
Read our full Market Update Week 35 Market Analysis There were gains across the board last week, as China indicated it had no immediate plans to retaliate to the latest round of US tariffs. In Sterling terms, global equities were up +3.0%, led by US equities which were up +3.7%, as trade-sensitive technology and industrial […]
Weekly Market Update: The Yield, Not “Inflation” Will Determine the Rotation
Equity market gains early last week were, broadly speaking, eroded as bond yields continued to rise, reaching one-year highs. Amid falling oil prices and rising political uncertainty caused by potential bans on vaccine exports coming out of the EU, many major equity markets fell last week. US equities fell -0.5% from record highs in Sterling terms, despite the country surpassing 100 million vaccinations on Friday. UK equities fell -0.7%, now down -2.4% from their 52-week highs in January. Globally the best performing sector was healthcare, whilst energy, due to oil prices, was the worst performing. Japanese equities rose +3.6% and are the best performing major equity markets this year. The US 10Y yield continued its rise up 9.6bps to 1.7%, while the UK 10Y rose 1.6bps to 0.8%. Gold rose +1.3% on the week. Oil has seen back-to-back weekly declines, down -6.1% to $61.2 a barrel, due to a glut of supply and weakening demand forecasts.
Monthly Market Update: Positive markets and slow recovery
For the better part of the last three years the core of our investment policy has been simple: “Don’t fight the Fed”. As accomplished economist Mohammed El-Erian put it, Quantitative Easing is not the biggest game in town, it is rather the only game in town. Prices for risk assets are almost completely dependent on […]
Weekly Market Update: Flexible Federal Reserve Sends Cable and Yields Higher
Read our full Market Update Market Update US equities climbed +1.4% last week with, major indices setting new record highs, as US Federal Reserve Chairman Jerome Powell announced a shift in how the Fed views inflation, saying it won’t increase interest rates to respond to low unemployment levels and also won’t worry as much about […]
Weekly Market Update: Major indices end the year on a positive note
Market Update Most major equity market indices ended the year on a positive note. Global stocks gained +0.2% in Sterling terms over the last two weeks of trading to close the year up +12.4% in Sterling terms. Over the year, due in large part to a Tech rally following the early pandemic crisis, US stocks […]
What is the difference between a Mazars CIO and a boiling frog?
As an analyst I hate metaphors. While they are a very useful tool to turn my thorough -but often thoroughly boring- analyses into actual readable pieces, they also almost always convey a false sense of proportion. One of the most successful, yet dangerously misleading narratives I’ve read lately is one that equates investors to slowly […]
Weekly Market Update: Bonds Sell Off Spills Over to Wider Market
A significant rise in US Treasury yields unsettled markets last week. US equities fell -1.9% in Sterling terms, with Tech stocks suffering their worst week in nearly six months. UK equities fell -1.9%, with Energy and Financials the only two positive sectors for the week. Emerging Markets suffered the greatest sell-off, having led global equity markets so far this year. UK and Emerging Markets are the only major equity markets still positive for the year in Sterling terms. Globally the only positive sector was Energy which was supported by rising oil prices. Investors will keep a keen eye on the OPEC+ meeting this week for any indication of increased oil supply. Japanese equities fell -2.4% in Sterling terms, the worst performing region year-to-date for UK investors. The US 10Y yield continued its rise, up 6.9 bps to 1.4%, at one point hitting 1.6%, and the UK 10Y rose 12.2 bps to 0.8%. Long-term yields are now trading at their highest level since the pandemic. Gold fell -2.3% on the week, while Oil rose +4.4% to $62.7.
Weekly Market Update: Investors dilemma: Cheaper bonds or returning dividends?
Markets returned to positive territory this week, supported in part by progress on the Biden stimulus bill. However, chair of the Federal Reserve Jerome Powell’s speech, with a lack of updates to current policy, disappointed investors leading to a sell-off on Thursday afternoon. US equities rose +1.7% in Sterling terms. UK equities rose +2.5%, with UK equity markets benefiting from rising oil prices. Emerging Markets grew +0.9% in Sterling terms, although this was a more moderate +0.1% in local currency terms. Globally the best performing sector was Energy, whilst IT was the worst performing, as the rising yield environment impacted valuations. Japanese equities rose +1.0%. The US 10Y yield continued its rise, up 16.1 bps to 1.6%, while the UK 10Y fell 6.4bps to 0.8%. Gold fell -1.1% on the week. Oil rose sharply, up +8.4% on the week to $66.5 following the OPEC meeting where it was decided to hold production at current levels, when a rise in production had been anticipated.
Will the rotation into value continue?
While it remains to be seen how long value leadership will last, many of the drivers that led investors to flock to growth stocks have reversed and now favour value stocks.
Weekly Market Update: Equity Momentum Continues
For a second week in a row it was green across the board for equities, as global stocks gained +2.4% in Sterling terms and +3.7% in local terms. European stocks were amongst the best performers for a second week, with Japanese equities performing equally well. Early in the week markets focused on the US returning […]
Quarterly Outlook: Inflation: What is it good for?
Inflation expectations rising scared lethargic bond markets and became the most contentious subject of debate in the first three months of the year. Read our outlook to find our position on inflation and the impact on risk assets
Shariah Investing: the growth of the Islamic Finance gives private clients more options than ever before
This article is the first in a series about Islamic investing Most investment advisers have encountered investors looking for Shariah compliant portfolios at some point. My own experience has previously been one of frustration as the universe of investable funds did not offer enough options to be able to construct portfolios which satisfied clients’ risk […]
Weekly market update: The Fed is not the answer to everything!
US, UK and European equities were relatively unchanged in Sterling terms last week, faring -0.1%, +0.1% and -0.1% respectively, amid concerns that the rate of global growth could start decelerating. Japanese equities were up +4.0% despite the resignation of Prime Minister Yoshihide Suga, while emerging market equities were up +2.7%, positive for a second week in a row after the Chinese tech sector had fallen significantly in previous weeks. Globally, stocks were up +0.3%, with energy and financials being the only sectors exhibiting losses. The US 10Y Treasury yield was down -1.5bps finishing the week at 1.322%. The German 10Y Bund yield was up +6.2bps amid higher than expected inflation in the euro area. Sterling was up +0.8% against the US Dollar and unchanged relative to the Euro. In US Dollar terms gold lost -0.1%, while oil prices rose slightly by +0.1%.
Weekly market update: How much longer can liquidity mask reality?
Global stocks were down -1.1% in Sterling terms last week amid fears of momentum fading and growth concerns due to the persistence of supply chain issues. Japanese stocks were the only region to post gains, rising by +3.8% in Sterling terms, buoyed by news of prime minister Suga stepping down and expectations of further stimulus. UK, US and European equities were all down -1.5% driven by inflation concerns and uncertainty about the economic outlook. Globally, all sectors exhibited losses apart from consumer discretionary. The US 10Y Treasury yields were up 1.7bps, finishing the week at 1.343%. German 10Y Bund yields were up +2.6bps to -0.332% after the ECB announced it would reduce the pace of its pandemic asset purchasing programme. Sterling fell against the US Dollar by -0.2% and rose by +0.4% vs the Euro. In US Dollar terms gold lost -2.1%, while oil was up by +0.7%.
Fight the Fed… when it’s hawkish (and a few words about Germany)
Stock indices in most developed market regions rebounded strongly after Monday’s acute sell off amid fears of Evergrande’s default - global stocks were up +0.7% in GBP terms. EU stocks were up +1.7% despite business activity losing steam, while US stocks rose +1.0% after recording their biggest daily drop since May 12th, on Monday. UK stocks rose by +1.0% as the BoE announced that rates will be unchanged; however holding a more hawkish stance. Globally, Energy stocks continued their upward trend posting solid gains of +4.0% followed by financials, IT and consumer discretionary. The US 10Y Treasury yield was up 8.9bps finishing the week at 1.453%, while the UK 10Y yield was up 7.4bps reaching 0.922%. Sterling fell by -0.4% and -0.3% against the USD and the Euro respectively. In US Dollar terms gold rose by +0.2%, while oil was up by +3.4%.
Quarterly Update: Will the Post-Covid Labour Market ever be the same?
'Work' may never be the same after the pandemic. How might things play out? What do businesses need to know to prepare? Read our quarterly economic update
It’s not inflation that will transition. It’s everything else.
A new, more transmissible variant, and a surprisingly hawkish Fed brought some of the most volatile trading days in months.
WEEKLY MARKET UPDATE: UPBEAT US JOBS FIGURES BOOST EQUITIES
Equities saw a third straight week of strong returns, with Japan the only region experiencing losses in Sterling terms (down -1.6%), although it was also positive in local terms (up +3.1%). US ADP National Employment figures showed fewer job losses, causing an initial spike in equities, which continued later in the week as it was […]
WEEKLY MARKET UPDATE: SECOND WAVE FEARS SEE MARKET JITTERS
Equity markets sold off across the board last week, declining initially amid fears of a secondary wave of infections and a pessimistic outlook from the Fed, although there was a sharp recovery later in the week on additional stimulus expectations. In local terms global equities fell -2.5%. However due to Sterling weakness, in part due […]
Weekly Market Update: Global markets rally amid Brexit uncertainty
Read our full Market Update Week 36 Market Update Global stocks were up last week, gaining +1.9% in local terms and +0.9% in Sterling terms as the Pound appreciated after the House of Lords passed a bill giving parliament the power to, in theory, prevent a no-deal Brexit. In addition to this, the Prime Minister […]
US 10 Year Yield at all time low in response to Coronavirus fears
Download our Full Market Update here Market Update Global stocks saw a sharp sell-off last week after COVID-19 cases spiked in Italy, Iran and South Korea, pushing recession fears higher and expected corporate earnings lower for 2020. Global stocks fell -9.4% in Sterling terms, with US equities experiencing the quickest correction since the Great Depression, […]
Weekly Market Update: Global stocks gain in local currency terms, Oil rallies on drone attack
Read our full Market Update Week 37 Market Update Global stocks were down -0.2% last week in Sterling terms and up +1.3% in local currency terms as Sterling appreciated versus other major currencies as Boris Johnson adopted a softer stance on the Irish border; increasing the likelihood of a deal being reached before the October […]
iPhone-as-a-service? Enter the period of everything-as-a-service
Charles Darwin gave us the theory of evolution. The species most adept to change survives. This model applies not just to organisms but to economies and businesses. In fact, so ubiquitous is the analogy between business and hunting and survival dynamics the language we use to describe ordinary business processes and transactions often stem from […]
Weekly Market Update: Sterling depreciation buoys Global Equities, bond yields fall
Global stocks were down -0.4% in local currency terms last week, however returns for UK investors were +0.3% after Sterling depreciated versus major global currencies, down -0.5% and -0.3% versus the US Dollar and the Euro respectively. US, UK and European stocks returned +0.3%, +0.4% and -0.3% over the week, whilst Emerging Markets equities posted […]
Weekly Market Update: Stocks trade higher on US jobs numbers, Sterling gains versus Dollar and Euro
Read our full Market Update Market Update A second straight week of strong performance for Sterling, up +1.7% vs the US Dollar and +1.2% vs the Euro as markets further priced in a Conservative victory at the coming General Election, once again mean that although global stocks were up in local terms, UK investors experienced […]
Weekly Market Update: Global stocks continue their climb, Sterling declines
Read our full Market Update Market Update Global stocks posted strong gains last week, up +1.3% in local currency terms and +3.7% in Sterling terms after the Pound depreciated versus other major currencies. Sterling fell shortly after the UK general election when Boris Johnson signalled the UK will leave the EU with or without a […]
It’s the worst start in 20 years. Here’s why investors should feel fine.
The worst start to the year inn 20 years leaves investors confused. Here's why we are more relaxed about it.
Weekly Market Update: Stocks Steady on US Earnings Growth
Market Update Despite concerns about coronavirus continuing to dominate headlines, markets on the whole edged up last week, with global equities gaining +1.2% in local terms, which translated into a +0.1% gain for UK investors. The resignation of UK Chancellor Sajid Javid saw Sterling rise along with gilt yields. Javid’s replacement, Rishi Sunak, is expected […]
Volatility in global stock markets continued last week, but with little direction and significant swings between positive and negative daily returns
Figure 1. US stock market returns in the last two weeks. The most significant development last week (other than the continued spread of the Covid 19 virus itself) was the 0.5% emergency rate cut announced by the US Federal Reserve which received a luke warm reception from markets. Over the last ten years we have […]
WEEKLY MARKET UPDATE: US-CHINA RHETORIC UNNERVES MARKETS
Markets rallied throughout last week, however US equities closed lower on Friday and down -1.6% in Sterling terms for the week, with other regions following suit this morning, on concerns that tensions between the US and China could escalate due to accusations from the US administration over the origins of the Coronavirus. For the week, […]
Investing, “in the time of Cholera”
We can comfortably use a phrase that, under other circumstances, would surely risk bringing upon us financial anathema: “This time is different”.
WEEKLY MARKET UPDATE: A MORE SANGUINE WEEK FOR MARKETS
By regular standards it was a rocky week for equities, which rallied 2-3% in the first few days, but fell 4-5% later on. However in comparison to preceding weeks market moves were somewhat muted, perhaps because the news-flow has provided little further clarity as to the time-scale and magnitude of the COVID-19 crisis – markets […]
WEEKLY MARKET UPDATE: IS THIS RALLY A “HEAD FAKE”?
Last week (Friday 3 to Monday 13 April) global stocks rose on the back of an improved narrative regarding the Coronavirus pandemic, as markets see a ‘flattening of the curves’ and a reduced pace of new infections, while many countries weigh reopening their economies. Boris Johnson’s survival helped improve the narrative both for the UK […]
The Great Lockdown – In Perspective
what goals cannot be achieved within the former, might be achieved by investing in stocks and bonds, whose growth is concomitant with the survival of capitalism.
Quarterly Investment Outlook Q2 2020
At our Investment Committee meeting in the first week of January we discussed amongst other things the heralded resolution of the trade war between the US and China, the fact that the US Federal Reserve was printing more money, and the renewed optimism that came from a stable government here in the UK. Cautious bullishness on risk assets was the tone of the meeting. Looking back at our discussion documents from that meeting, our ‘Wall of worry’ chart which details the things which we consider to be possibly obstructive to stock market gains, did not even mention Coronavirus. In other words, we have experienced a true ‘Black Swan’ event. Global stock markets fell by 20% over the first quarter (around 15% for a Sterling based investor) having lost as much as 32% by mid-March. Gold performed its role as a safe haven rising 12% in Sterling terms, whilst Gilts rose by over 6%.
Quarterly Investment Newsletter Spring 2020
At our Investment Committee meeting in the first week of January we discussed amongst other things the heralded resolution of the trade war between the US and China, the fact that the US Federal Reserve was printing more money, and the renewed optimism that came from a stable government here in the UK. Cautious bullishness on risk assets was the tone of the meeting. Looking back at our discussion documents from that meeting, our ‘Wall of worry’ chart which details the things which we consider to be possibly obstructive to stock market gains, did not even mention coronavirus. In other words, we have experienced a true ‘Black Swan’ event. Global stock markets fell by 20% over the first quarter (around 15% for a Sterling based investor) having lost as much as 32% by mid-March. Gold performed its role as a safe haven rising 12% in Sterling terms, whilst Gilts rose by over 6%.
Is market optimism justified?
I struggle with the idea how news that nothing has changed in my chances of survival from a killer disease that was enough to lock the whole world down, is enough to send the world’s biggest companies trading at eye-watering 22.6x earnings (the average is around 15-16). It seems to me more credible that the market is running on excessive amounts of QE
Weekly Market Update: Global stocks rally on US & China “phase 1 deal”, Sterling declines as muted inflation increases rate cut probability
Read our full Market Update Market Update Risk assets gained last week on the signing of the ‘phase 1’ trade deal between the US and China. Global stocks were up +1.9% in Sterling terms and +1.6% in local terms, reaching greater all-time highs. Returns for Sterling investors were pushed higher as the Pound fell on […]
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