Market Update - 12th October 2018

Christopher Peel - Chief Investment Officer
 

Equities

Earlier in the week, US equities suffered their worst declines since February 2018. The large rise in US government bond yields and profit-taking in the technology sector were the catalysts for the dramatic fall in global equity markets. This correction is significant, but we do not believe it signals the end of the 9-year bull market, given the growth outlook, low level of inflation and upbeat corporate earnings. We have been defensively positioned and have significantly outperformed our global equity and bond benchmarks in the sell-off. Looking ahead, we will be monitoring economic data and markets closely, with the aim of increasing risk in the coming weeks.

Equities

Earlier in the week, US equities suffered their worst declines since February 2018. The large rise in US government bond yields and profit-taking in the technology sector were the catalysts for the dramatic fall in global equity markets. This correction is significant, but we do not believe it signals the end of the 9-year bull market, given the growth outlook, low level of inflation and upbeat corporate earnings. We have been defensively positioned and have significantly outperformed our global equity and bond benchmarks in the sell-off. Looking ahead, we will be monitoring economic data and markets closely, with the aim of increasing risk in the coming weeks.

Sterling

The 4th quarter will be key for the Brexit negotiations and the future direction for sterling. The time for posturing is over and both sides appear to be showing a newfound willingness to compromise. We expect that a trade deal will be agreed by the end of the year. The UK is the 5th largest economy in the world and has a trade deficit with the European Union, so it holds a strong bargaining position. Sterling has risen 1.50% versus the US dollar this month and remains fundamentally undervalued. We expect sterling to appreciate further by at least 10% over the next 10 weeks and have hedged the portfolios to protect against any currency related losses.

Sterling

The 4th quarter will be key for the Brexit negotiations and the future direction for sterling. The time for posturing is over and both sides appear to be showing a newfound willingness to compromise. We expect that a trade deal will be agreed by the end of the year. The UK is the 5th largest economy in the world and has a trade deficit with the European Union, so it holds a strong bargaining position. Sterling has risen 1.50% versus the US dollar this month and remains fundamentally undervalued. We expect sterling to appreciate further by at least 10% over the next 10 weeks and have hedged the portfolios to protect against any currency related losses.

Tavistock Wealth’s Approach

As a reminder, our Centralised Investment Proposition is designed to meet the long-term investment needs of clients. We aim to fully participate in rising markets and limit losses during periods of correction. Professional risk management and portfolio construction through diversification are the cornerstones of Tavistock Wealth’s investment philosophy.

As a reminder, our Centralised Investment Proposition is designed to meet the long-term investment needs of clients. We aim to fully participate in rising markets and limit losses during periods of correction. Professional risk management and portfolio construction through diversification are the cornerstones of Tavistock Wealth’s investment philosophy.

This investment Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person. Source of data: Tavistock Wealth Limited. Date of data: 12th October 2018.

Want to know more about the Equity Markets?

Please contact us here:

8 + 2 =

Recent blogs
Tide may be about to turn

Tide may be about to turn

The following is an abbreviated version of John Leiper’s article ‘Tide may be about to turn’ for Investment Week magazine. Follow the link and read his views on page 23.

read more
Green Finance Summit 2021

Green Finance Summit 2021

Our Portfolio Manager for ESG, James Peel, was recently invited to provide his valuable insights into “Innovating Towards a Greener Future” as part of the London School of Economics Student’s Union Green Finance Society’s video conference: “Green Finance Summit 2021”.

read more
The Great Rotation

The Great Rotation

In Nothing Is More Powerful Than An Idea Whose Time Has Come, published in November, we introduced the idea of a Great Rotation across US equity markets. As shown in the chart below, this rotation is playing out in textbook fashion with value stocks outperforming growth by about 20% since the end of last year.

read more
The Unemployment Problem

The Unemployment Problem

The Fed’s dual mandate is price stability and maximum employment, but Jerome Powell has been unequivocal that it’s all about the latter. 

read more
Reflections

Reflections

This is the first blog since the holiday break. Whilst travel restrictions meant it wasn’t the holiday that had been planned, we adapted, and enjoyed the opportunity to spend some time together as a family and reflect on the last few months.

read more
Is the Bond Market Smarter than the Stock Market?

Is the Bond Market Smarter than the Stock Market?

Following on from last week’s blog, the dramatic rotation from growth to value remains in place for now. Early signs of quick snapback into the prior channel have not yet materialised and instead the ratio has consolidated and even shown signs of moving.

read more