20th December 2015
Dawn of the Fed
“When you come to a fork in the road, take it” - Yogi Berra - Player / Manager, New York Yankees. So the big day has arrived (again) and we will later find out whether the US Federal Reserve is finally going to bite the bullet and raise interest rates. The bond market is priced for a 79% probability that they will raise interest rates by 0.25%, bringing it up to 0.5%. One gets the distinct feeling that, a bit like Santa, if Janet Yellen doesn’t deliver for Christmas, there are going to be an awful lot of unhappy children....
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27th November 2015
Getting Serious
From a fund management perspective there wasn't a whole lot to get excited about in Chancellor George Osborne’s Autumn Statement although an increase in the economic growth forecast, from 2.3% to 2.4% was welcome. UK Government bond yields rose on the news marginally reinforcing as it does the case for higher interest rates in the future. Sterling strengthened as a result, making its biggest one-day gain this month. However, as markets have already got their heads around the idea that interest rates can actually go up, one gets the feeling that good news on the economy is now genuinely good...
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September 2015
Wait for it...
"I've got a message for your friend Jim Cramer. The Fed cannot permanently raise stock prices. The idea that the Fed is going one way or the other, and this is what's driving the stock market, is not true. He's one of the great people at looking at businesses, how good is this business, what's the profitability of the business, what's this thing worth? And to have him cheerleading for lower rates 24-hours a day is, I think, unsavory."---James Bullard, St. Louis Federal Reserve President, in reference to CNBC stock market pundit Jim Cramer. 1st September 2015 So, another Federal...
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August 2015
Black Monday - Time for a performance check
“The stock market is the only market where things go on sale and all the customers run out of the store” – Cullen Roche, Author and Investment Manager Stock and bond markets have been very volatile in the last couple of days with wild swings around the world. The problem is reported as having started in the Chinese stock market which was down 8.5% on its own “Black Monday” but spread dramatically to the rest of Asia, Japan and all other markets both developed and emerging. There can be no better illustration of Monday’s confusion than looking at the share...
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26th August 2015
Message from the CEO
Markets appear to some to have hit a brick wall with the ongoing Greek tragedy, a Chinese devaluation and some minor growth fears being touted. This and Mr. Carneys call to Asset Managers to “check” they are set for market falls if interest rates go up, ensures that worries abound. Indeed, the developed markets of the world have been trading close to 5-month lows in many cases in the last couple of weeks. Is the bull market, that began some six years ago in 2009, over? Or is there more to go for? Having seen the roller coaster movements of...
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August 2015
Chinese devaluation - Why now?
Last Tuesday, The People’s Bank of China (PBoC) shook global markets from their relative slumber with a sudden and unexpected devaluation of the Chinese Yuan. The move initially knocked the currency 2% weaker against the US dollar and there were further falls next day as the market got in on the act helping to drive the exchange rate down to a 4-year low. After a few days of confusion, the currency settled around RMB 6.40 against the dollar thanks to intervention by the PBoC who initially appeared surprised by the market’s negative reaction. However, in the absence of any clear...
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August 2015
Japan – It has to be different this time
An unprecedented policy initiative demands a new investment approach. We have written up the bull case for Japan repeatedly in recent years and been invested in Japanese equities for most of that time. Part of the investment rationale was down to the ambitious reform efforts of the Abe administration and partly our belief that the quantitative easing being undertaken was a true commitment to reflate the economy. In this, we were correct and our investment benefitted from the sectors that typically do well in that scenario such as banks, real estate and other financials. We also did so correctly expecting...
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July 2015
Review of Q2 2015
The second quarter of the year was a stark contrast to the first, with both global economic and geo-political events souring investor sentiments, leading to some increased volatility and overall decline in financial markets. Positively, despite these sharp falls recorded in many markets, our portfolios performed well, mitigating losses and out-performing their respective risk benchmarks. Over the first half of the year the portfolios have all recorded solid absolute and strong relative gains. The second quarter started on a positive note… The second quarter can be viewed as one of two halves, albeit unequal ones. The first half of April...
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July 2015
Stick to your principles
“We have to fight for principles. We could maybe set them aside in the short term. But in the medium and long term, we will suffer damage that way.” Angela Merkel, 29th June 2015. “Those are my principles, and if you don’t like them…well, I have others.” Attributed to Groucho Marks in 1983. Chucking the rule book out with any or all principles in the short term is not unfamiliar behaviour in the EU and maybe that’s why we all expected a deal by now. Perhaps this was a tad too optimistic because it’s been a busy start to the...
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June 2015
Market News
Global stock markets recovered from the December sell off when oil and mining stocks led the market down amid fears of a slowing economy as the price of oil stayed at the lowest level since 2009. But the stock market was prone to bouts of profit taking owing to the distractions of a number of geopolitical events and human tragedies ranging from conflict in the Middle East and Ukraine and renewed speculation over a possible Greek exit from the eurozone. As has become the norm, stock and bond markets were heavily influenced by the actions of central banks. The US...
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May 2015
The winner takes it all
So who saw that coming? Well, hats off to the “well groomed” Glaswegian pensioner, who remains anonymous, who bet £30,000 on a Conservative majority at 7/1. A member of the TAM investment team also had the same bet but, sadly, only a mere tenner. With Ladbrokes poised to pay out around £2 million to those who backed a Conservative majority, quite a few others guessed right as well. All the speculation is over and there’s a lot of news to digest, not least of which is the resignation of three party leaders; Nick Clegg, Ed Miliband and Nigel Farage, and...
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It's the final countdown
"Democracy is the worst system devised by wit of man, except for all the others” – Winston Churchill. So the election is nearly upon us and stock and bond market attention has shifted to what we may wake up to on May 8th. If the 2010 election is anything to go by, the first result out of the 650 constituencies will be known around 11pm in the evening on 7th May and, if you’re feeling up to it, you could watch the results coming in until it’s all wrapped up around 5am the following morning. This, however, is likely to...
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April 2015
Real estate’s safe house for ‘bond refugees’
Cast your mind back to the 2008 crisis. It seemed, the only thing outpacing the unsecured mortgages being underwritten was the speed at which they were being re packaged and issued back to Wall Street. Out of the ashes of this turbulent time in global economics has grown an asset class that while watched with a cautionary eye is starting to show signs of stability, growth and, most of all, a source of yield that today’s fixed income markets are struggling to deliver. Abdallah Nauphal, CEO of Insight Investment, argues that the mainstream market landscape has changed so much that...
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April 2015
Japan – Rise and shine!
Over the years, one has learned to be a little wary of putting out bullish investment notes on Japan. The financial writing landscape is littered with the graves of bull notes written by those who thought this time was different. Headlines such as “The sun also rises” were often penned at the end of impressive stock market rallies but on the eve of a major sell off. More often than not, this reflected the sincere belief that Japan was about to “de-couple” from the economic ups and downs of the USA, or was immune to the fickleness of the US...
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March 2015
Avoiding falls on the fells
“Whenever people talk about the weather, I always feel certain that they mean something else.” Oscar Wilde. As far as I know, the great Lakeland fell walker, Alfred Wainwright was, for all his supposed grumpiness, never a keen follower of the Gilt market. But if he had, his eloquent writings about the mountains, in all their moods, would at times be perfectly suited to the challenges faced by mountaineers and bond managers alike. This occurred to me last week during a spot of climbing in the Lake District which, some might think, is a perfect getaway for your Square Miler....
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March 2015
FTSE playing footsie with its 1999 record
Break Up, break out or break down? It’s December 30th 1999, the FTSE 100 has just closed at a record high of 6,950.60. At the time the world was full of promise as it entered a new millennium only for everything to be turned on its head as we suffered the 2000 Dot-com crash. Today Greek contagion and UK deflation concerns have had the index treading water at the 930 – 940 mark with brief breakthroughs past 950. It seems we are just waiting for that final risk-on indicator to push the index to new highs. Economists, strategists and chartist...
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February 2015
A Russian Winter
As a Russian winter bites a new cold war begins. With the crisis in Ukraine potentially tipping back into open warfare and the EU looking to escalate sanctions this is a short piece on the Russian economy and its population’s ability to withstand the current sanctions and austerity measures to live in Mr Putin’s newly coined “Mafia state”. I think many would agree much of the current sentiment in Russia goes back post world war 2 to historic global events such as the collapse of the Berlin Wall, the Cuban missile crisis and Mr Gorbachev watching Americans dive into makeshift...
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January 2015
Q€
€1.1 trillion total. €60 billion a month for 18 months. 80% of potential losses to be borne by national banks. 20% of potential losses to be borne by ECB. Option to extend based on 2% inflation target. If size matters then Mario Draghi may just about have delivered. The €1.1 trillion quantitative easing programme announced on 22nd January is bigger than markets had hoped for given the opposition he faced from the German Bundesbank and a large number of the German and Dutch hawks on the Governing Council. But in absolute terms €1.1 trillion over 18 months is less than...
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January 2015
Great Expectations
A review of 2014 and outlook for 2015. “Spring is the time of year when it is summer in the sun and winter in the shade.” Charles Dickens, Great Expectations. If you were a stock market strategist harbouring secret desires to be a writer of novels or soap opera storylines, you might have been tempted to write the entire chapter or script for 2014 in advance, for there were plenty of reasons to feel confident that the problems of the global economy in 2013 were at least well understood and, possibly, that markets would be more predictable in the year...
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