Blog

Seeing Past the Coronavirus Shock

Market Commentary | March 19, 2020

As unexpected shocks go, Coronavirus ranks in the very top tier of events capable of disconcerting investors, amongst the Great Financial Crisis (GFC) and Black Monday. Whilst news continues to horrify many investors with the human and economic implications, buried in the latest data in what statisticians refer to as “the inflection point of a logistics curve”, is a sign that the very worst may be over. February news was dominated by the global spread and impact of the Coronavirus (Covid-19). Dow Jones, S&P 500 and the FTSE All-Share fell by over 14%, 12% and 11%. So far in March (16th March 2020), these Index markets have been continuing their decline and the correction has now developed into a full-scale bear market.

So You Want to be a Tech Superstar?

Technology stocks are the top dogs of the stock market. For the last 6 months or so, they have risen almost without a pause and have become a greater and greater influence on the direction of the overall stock market. Last month, the big four MAGA stocks (Microsoft, Amazon, Google (Alphabet) and Apple) reached the point where they represented over 17% of the total S&P 500, and contributed almost 70% of the gains attributable to that Index in 2020 alone. How did they get this big and thus so influential on both the stock market and the wider economy? There was of course a lot of hard work, plus some innovative ideas, but they had a few advantages that were (mostly) unavailable to other firms. If you want to become a “tech titan”, some or all of the following tailwinds need to be behind you.

The Japanification of World Bond Markets

Market Commentary | March 6, 2020

[This post is a follow-up to that of October 2019, in the light of further falls in interest rates; the message remains very much the same however: stick to the plan. Changing asset allocation in response to market movements remains fraught with danger. Stay diversified].

28 Days Later

Evidence Based Investing | February 28, 2020

The information on this page is only intended for use by professional clients, regulated financial advisers and intermediaries who are knowledgeable and experienced in the financial services market and in investment products of this nature. It is not intended for retail investors. It has been an “interesting” week. In the space of just 6 trading days, the Dow Jones Index went from all-time highs to a “correction” (defined as a 10% fall from a high point). Reportedly, every continent on the globe is now infected (apart from Antarctica) and there have even been deaths in high political circles- for now in Iran, but other senior government personnel in other countries will inevitably follow, which may concentrate minds at decision-making level.

What’s the Future for Value?

Evidence Based Investing, Factor Based Investing | February 21, 2020

Returns to the Value factor continue to disappoint. Against Momentum it has been almost one-way traffic for the whole of 2020, whilst in the longer term, we are now approaching the low point (for Value relative to Growth) reached in 2000 as per the Russell 1000 Index. [The Russell 1000 Index represents the 1000 largest capitalisation firms in the US]. Brief spikes in Value (as seems to be happening currently) last only a few days, before the selling resumes anew.[Note: the chart below plots Value against Momentum, not growth; but a nearly all the highest momentum scoring shares ARE growth shares, they amount to one and the same]. In case there should be any doubt, it IS a global phenomenon; only US Value has beaten the MSCI World Index, and all major Value regions have even lagged long-dated UK Government bonds, which are a risk-free asset.

Active versus Passive Q&A

Evidence Based Investing, Factor Based Investing | December 13, 2019

From time to time both ourselves and our clients get contacted by journalists looking for quotes and views on the debate surrounding Active and Passive Investing, which (usually) revolve around asking us what our investment approach is, or how we use the two types of investment strategies for our portfolios. So, in order to formalise our response and to give clients an idea of how to respond should they receive similar enquiries, we decided to put our views down “officially”, in the form of a Q&A.

The Worlds Ablaze

Market Commentary | November 29, 2019

More than two years ago, we discussed the rise in social unrest across the globe as nations start to split apart. This has got much worse since then and it appears to have become generalised as the cleavage between populations has now spread to families. Why now and how will it all end?

Aramco and the future of Oil.

Market Commentary | November 15, 2019

A pub quiz question- what has been going on for more than 3 years, amid much frustration and bemusement to all involved, having got nowhere at all during that time and is not Brexit?

How ESG are the ESG fund providers?

ESG Investing | November 1, 2019

One could argue that good ESG starts at home, and not just with a product range. As demand and awareness around environmental, social and governance factors grow, ETF providers are under increasing pressure to showcase their own good practices.Fund houses will also have to become more transparent on ESG, whether they like it or not. By 2020, the European Commission will require investment houses to disclose how they integrate ESG opportunities and risks into their processes to stop funds being labelled as ESG when they normally wouldn’t qualify – otherwise called ‘greenwashing’.

The Repo men

Market Commentary | October 25, 2019

In the context of financial markets, Repo’s refer not to repossessions but repurchase agreements. This is the process whereby banks who are (temporarily) short of money can borrow from those who have excess cash so that they stay within their legally required reserve requirements. Generally, the interest rates charged are that of the prevailing Fed funds rate, which s currently in a range of 1.75-2%.