Q3 Update 2019 – Market Views
19th September 2019
The summer months was, as we had predicted in early June, a time when markets took a pause. Many investment markets taking a step back and reacting to the economic, financial and political news that came through in Q3, The main trends that we have witnessed this year followed through into Q3: US/China trade wars, UK Brexit concerns, a global economic slowdown. Of these three themes all are still ongoing. Lets focus on the economic picture. It is clear we are entering a significant global slowdown phase, a synchorized slowdown. A slowdown that could create recessionary effects in the UK, Germany, Japan and lead to a significant slowdown in the USA. The knock-on to emerging markets will also be felt, and indeed is being felt, witness the recent Argentinian debt and equity falls following primary elections.
The key talking point through the quarter was the state of the US economy and, against that background, various economic and financial indicators. In August the US 10 year Treasury yield briefly dipped below the 2 year US Treasury yield, an inversion of the yield curve, an often predicted signal of a forthcoming US economic recession. The US Federal Reserve cut interest rates twice in the quarter, that was deemed not fast enough by many. Recent US economic data has also been of concern with US manufacturing output falling and falling significantly.
This background of global economic re-adjustment is bound to play into difficult investment markets. We are seeing investors continue to move, in significant numbers, from active to passive investment strategies. Investment markets had a very positive 1H of 2019 and the second half will, we expect, take some of these gains away. The key question is what can policymakers do to avert falling asset prices: can interest rates fall further, will there be more fiscal easing, can we expect more central bank injection of capital? All are unknowns. As is inevitable in any prolonged economic growth phase, a downturn is to be expected, often much needed and most probably will be short lived. We watch closely and will get better insight as we get to the end of the year. It is very clear that 2020 will certainly be a challenging year for global economic growth.
Taking into account all of the above, it is pleasing to see that our focused, conviction-led approach to investing and taking a patient and long-term approach works. Our fund range have returned between 13% and 16.5% (after fees), pleasing performance against what is a difficult investing environment. We do not worry about short-term market movements. Our multi-fund, multi-asset portfolios only have 12-14 funds allocated which are highly liquid, transparent and standard investments from reputable investment firms. Our patient approach to capital allocation means we have not made any changes to our asset allocation and fund selection this year, this may change. We remain vigilant to the changes in the global macro-environment. We keep a close eye on how fund managers are responding to the current economic re-adjustment, having direct dialogue with the underlying fund managers in the funds we hold. We remain committed to being long-term investors and believe this investment philosophy is ideal to come through this difficult investment phase.
We have a focus on creating real returns for our clients over time. This is our sole goal.
Saftar Sarwar
Chief Investment Officer
0203 943 5085
07789912318
Please note: performance shown reflects simulated past performance, which is no guarantee of future returns. Capital at risk, please consult a professional before investing.
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