Q4 Investment viewJohn Leiper - Senior Portfolio Manager
What are our strongest Q4 convictions?
We are underweight bonds and overweight equities going into the 4th quarter. Known as the reflation trade, it’s a theme that has played out successfully over the year and continues to gain momentum. The return of inflation and synchronised growth are the driving forces supporting our view. Changes in US fiscal and monetary policies are leading the way and last week the White House announced proposals on US tax reform, including a corporate tax cut from 35% to 20%. This shift in fiscal policy will boost US corporate earnings and equity valuations, which will extend the bull market well into next year. The Federal Reserve has begun to unwind its QE programme and indicated that it will raise rates in December and at least 3 times in 2018. Strangely, the market is less hawkish than Fed officials, but history suggests that it’s never wise to “fight the Fed”.
As Halloween approaches, what scares us the most in the investment world at the moment?
It has been 30 years since “Black Monday” – the largest ever one-day stock market crash. The anniversary has prompted many investors to ask whether something on this scale could happen again? Then, like now, stocks look historically expensive. Today, systematic quantitative trading strategies have the potential to exacerbate a market sell-off similar to the impact of the portfolio insurance techniques used during the 1980s.
Volatility in global bond and equity markets are at all-time lows. This has driven many investors into increasingly riskier investments, leaving them vulnerable to a significant reversal back to the longer-term moving averages. This will likely manifest itself in higher bond yields and discounted equity valuations. The most likely catalyst is a policy mistake linked to the end of QE and monetary policy normalisation. To counter these concerns, we have shifted our portfolios towards historically relevant Sharpe Ratios, reduced duration across the board and increased exposure to Smart Beta equity strategies.
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.
Want to know more about the Equity Markets?
Please contact us here:
Christopher Peel gives his views on global financial markets…read more
Welcome to the Q2-2019 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.read more
Speaking to CNBC this morning, Christopher Peel covers current market views and monetary policy, along with the global risk environment and the ongoing Brexit debacle.read more
Speaking to CNBC Christopher Peel discusses the next steps for Brexit negotiations.read more
Christopher Peel gives his views on global financial markets and Tavistock Wealth’s portfolio positioning on CNBC.read more
Welcome to the Q1-2019 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.read more
Christopher Peel, our Chief Investment Officer, discusses the environment in U.K. investment before Brexit deal on CNBC.read more
Tavistcok CIO Sees a good Environment to Be Long Risk Assets.read more
Christopher Peel talks about Brexit and its potential impact on Sterling.read more
The average client invests for the medium to long term. Of course they’ll experience ups and downs, but the aim is always to increase the value over time, right?read more
Speaking on Bloomberg, Christopher Peel discusses the recent decline in the price of oil and the potential impact on U.S. High Yieldread more
Welcome to the Q4-2018 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.read more