Geopolitical Change and Asset Class RotationChristopher Peel - Chief Investment Officer
2017 is shaping up to be a year of momentous geopolitical change, especially in the United States and in the United Kingdom.
Democracies on both sides of the Atlantic have voted in favour of a shift towards nationalism, protectionism and the pursuit of greater sovereignty. It is far too early to predict the long-term market implications of these surprising political events. Investors will need to rely on strong risk management, portfolio diversification and patience during periods of heightened volatility.
The vocal minority in the US and many of the world’s political leaders may not like his policies, but Middle America swept him to victory and these voters are getting exactly what was promised. The Trump rally in the US equity markets is not surprising given his radical views on existing trade relationships, infrastructure spending and border controls. In time, US based manufacturing companies will regain the market share lost during the last quarter century, especially at the expense of bordering countries such as Canada and Mexico.
The government will eventually negotiate separate trade agreements with countries such as the US, China, and Australia. The UK is in a strong negotiating position to retain most of its current trade flow with the EU, given that it purchases more goods than it sells to the continent. These new trading relationships will ultimately lead to a strong recovery in sterling and a more balanced economy, which is already the strongest within the G7 countries.
Welcome to the Q4-2020 ‘Quarterly Perspectives’ publication.
On Tuesday Fed Chairman, Jerome Powell, made a speech at the National Association for Business Economics, during which he implied the government should err on the side of caution and provide too much stimulus rather than too little.
Our Chief Investment Officer, John Leiper, was recently invited to provide his valuable insights as part of ETF Stream’s video conference livestream: “Beyond Beta Europe Digital: Smart beta unwrapped”.
Saturday Night Live has a reputation for expertly parodying presidential election debates. My all-time favourite is Al Gore (Darrell Hammond) versus George Bush (Will Ferrell) and this year didn’t disappoint with expert performances from Donald Trump (Alec Baldwin) and Joe Biden (Jim Carrey).
Our Chief Investment Officer, John Leiper, was recently invited to provide his valuable insights into emerging markets as part of ETF Stream’s video conference livestream: “Big Call: Emerging Markets”.
Last week the FTSE Russell decided to include Chinese government bonds in its flagship World Government Bond Index (WGBI). The decision follows similar moves, from JP Morgan and Bloomberg, and a failed attempt to do so just one year prior which resulted in a number of reforms, to increase accessibility and currency trading options, that ultimately paved the way for benchmark admission.
The following is an abbreviated version of my recent article ‘A Deep Dive Into… UK Equities’ for Investment Week magazine. Follow the link and read my views on page 17.
In last week’s blog we discussed the ‘Nasdaq whale’, Softbank, and the role it played, alongside an army of retail investors, driving tech prices ever higher prior to the recent correction. These short-term ‘technical’ flows are driven by the options market as traders look to hedge their underlying exposure, amplifying moves both lower and higher.
The ACUMEN Portfolios continue to perform well. The performance for the rolling quarter (to the end of August) remains strong relative to the market composite benchmark and the current assigned IA sector, which I understand many advisers use for comparison purposes.
In a speech for the history books, last week Fed chairman Jerome Powell announced a significant change to the way it conducts monetary policy by formally announcing ‘average inflation targeting’.
Despite the fact the coronavirus has plunged many countries into recession, global equity markets are now back at all-time highs, as measured by the Bloomberg World Exchange Market Capitalisation index.
In The Return Of Inflation (5th June 2020) we made the case for a transition from the existing deflationary narrative to one in which markets start to price-in inflation.