Eight wealth managers on their top China funds
Wealth Manager asked eight wealth managers about their top China funds to commemorate the Chinese Year of the Ox.
The World In A Week – Half-Term Home Economics
Last week saw many of the developed nations release their GDP data relating to the final quarter of 2020. The UK economy grew 1.0% in this period, beating market expectations, and meant that the UK avoided a double-dip recession. However, the annual GDP growth figures looked less compelling with the UK economy shrinking by 9.9% in 2020, the largest annual fall on record. The UK has been one of the hardest hit economies globally with the closure of the tourism and travel industries significantly impacting output, which contributes a staggering 11% to GDP.
Elsewhere, the final US GDP estimate will be released next week but the expectation is that the US grew at 4.0% in the final quarter of 2020. Revenues of companies who constitute the S&P 500 grew by 1.3% in the final three months of 2020 with profits accelerating 3.4%, beating analyst expectations. The proposed $1.9 trillion stimulus package would certainly boost consumption and reduce unemployment levels which currently sit at 6.3%. Goldman Sachs has forecasted that the proposed stimulus bill of $1.9 trillion may be reduced to $1.5 trillion, however this still equivalates to 7% of GDP.
The International Monetary Fund (IMF) also released its global outlook projections with world output expected to grow at 5.5% in 2021, with emerging markets such as China and India expected to lead the way. Markets followed this same narrative last week with Morgan Stanley Capital International (MSCI) Emerging markets returning +1.50%, outperforming the S&P 500 and the FTSE All Share in Sterling terms.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 15th February 2021.
© 2021 Beaufort Investment. All rights reserved.
The World In A Week - Snakes And Ladders
Some elements of investing can be a zero-sum game. When one side of an investment gains, the other side loses. For those investing in GameStop, the profits made when the stock went up was reflected in the losses made by the hedge funds who were betting on the stock going down. It is all well and good when the dice roll means you land on a ladder, but it is not so pleasant when you land on a snake.
So, it would appear that the Reddit bubble has burst and there will undoubtedly be some pain for those individuals who entered the battle late. GameStop’s share price started the week at $316.56 and finished at $63.77, representing an almost 80% drop for the week, still significantly above its 52-week low of $2.57.
From a psychological perspective, we hope that these speculative episodes do not deter true investors from taking appropriate risks for their long-term investments, as they do not affect or influence our robust investment processes.
In a world that is waiting for vaccinations to inoculate sufficient people in order to ease lockdown restrictions, knowing that central banks and governments are still committed to providing liquidity and stimulus is critical. This was underlined in the Bank of England’s Monetary Policy Committee minutes last week, where they explored the possibility of negative interest rates. However, it was stressed by Governor Andrew Bailey that while we should expect the Bank of England to have investigated all monetary options, he did not want to send any signal that it intended to set a negative bank rate at some point in the future. It is also clear that President Biden wants to reassure the US people by pushing ahead with the latest instalment in a long line of fiscal stimulus plans. The $1.9 trillion economic relief plan looks set to be pushed through, with or without the support from Republicans.
It seems that “doing whatever it takes” is the modus operandi for most central banks and governments during this pandemic, and the originator of the phrase has returned to the political spotlight. Former President of the European Central Bank, Mario Draghi, who adopted the phrase in 2012 to give reassurance that the Eurozone would not crumble, has been asked to head up the Italian government. Can he repeat his success as Super Mario and stabilise a faltering Italy?
The final person sliding down the gameboard is Jeff Bezos who announced that he will be stepping down as Chief Executive of the world’s largest e-commerce retailer. Climbing a ladder to fill those shoes is Andy Jassy, who was heading up Amazon Web Services and will have a big plate to deal with once the pandemic has receded.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 8th February 2021.
© 2021 Beaufort Investment. All rights reserved.
The World In A Week - GameStop & Match
Well, who would have thought a small US bricks and mortar video retailer would grab the attention of the world? As we keep seeing of late – expect the unexpected! We’ve not heard the term David vs Goliath being used as yet, but we’ll coin it!
GameStop is the company in question. A company sitting in a very precarious financial position and being heavily bet against by the hedge fund firm, Mervin Capital. Then, in step many private investors, fueled by social media chat on sites like Reddit, have protected the company from the “bully boys” of Wall Street. Well, what have we seen? The share price rocket over +900% this year, even though the stock price took a -70% hit on Thursday. A company in the abyss worth less than $1bn a few weeks ago, suddenly skyrocketing to a market cap over $25bn, is simply staggering! The plot continues to thicken – industry watchdogs and regulators are warning about market abuse and potentially looking to step in. The trading platform that many ‘Redditors’ use to transact Robinhood Markets has stopped taking trade orders on the stock, with many private investors now crying foul – why can hedge fund managers do as they see fit, but mom & pop can’t? Lawsuits are being threatened, but Robinhood has probably taken the right moral action, to stop the same investors losing their shirt, as highlighted by the stock price fall on Thursday. At the same time Robinhood also had to go looking for a cash injection itself, as they had to put up the collateral for these trades after they got so big!
Why should we care? Is this a real attempt to rescue the company or David trying to lay one on Wall Street Goliaths, and why if that’s the case? Woolworths, C&A, Blockbuster are just a few high street names that have fallen by the wayside. Why? Because the model had stopped working and demand shifted elsewhere. However, is this whole episode significantly more profound and a reflection of the failures that lead to the Great Financial Crisis, and the widening social and economic gaps that continue to persist under capitalism. Will this be a watershed moment?
What we have seen over the last few months is that global economic data has been much stronger than forecast, which highlights the ability of humankind to adapt (or bouncebackability as they used to say on Soccer AM) in the face of adversity.
In other news – there continues to be mud-slinging in Europe over the slow and unequal rollout of the vaccines, we’re sure many Brexiteers are sitting there saying “I told you so!”. Finally, the AstraZeneca vaccine has been given the approval in Europe, and the Novavax vaccine shows 89% effectiveness in UK trials. Normality may return…..
The World In A Week - Dr Copper Makes A House Call
Last week saw the continuation of a reversal of fortunes for major asset classes. Having been totally unloved since 2016; UK Equities were the only equity asset class in positive territory for the week. In addition to this, tech stocks as measured by the NASDAQ index sold off heavily, while global value equities outperformed global growth equities. Furthermore, within Fixed Income, a stark divergence in outcomes has emerged since the start of the year. High Yield bonds are in positive territory, China Bonds are flat, global credit and global treasuries are down and Sterling credit and Gilts are down heavily.
The primary reason for this shift in market dynamics has been the sharp and sustained rise in inflation expectations since their trough in March of last year, and the corresponding rise in global interest rates. While it is critical to bear in mind that inflation and interest rates remain at very low long-term historical levels, the recent trends have broken the market foundation that these variables are always on a persistent downward trend. This trend has been a major factor in allowing growth equities to dominate to the degree in which they have recently.
We are seeing this play out in multiple markets. The copper market (which has been dubbed “Dr Copper” given its alleged clairvoyance for rebounds in economic activity) has hit a 9-year high. WTI Crude Oil Futures are now priced at $60 dollars a barrel, having traded in negative territory last April, and the broader-based Bloomberg Commodity index is up +9.3% for the year to date. As mentioned in previous updates, global shipping costs have also risen sharply.
Global central banks, in particular the Federal Reserve in the US, have committed to leaving base interest rates unchanged to support the economic recovery from COVID-19. The Bank of England has also shown no desire to raise rates, although the prospect of negative rates now seems very far removed, however market interest rates have risen sharply. For the year to date, the yield on a 10 Year US treasury bond is up by +49.7%, while the yield on a 10 Year UK Gilt is up a whopping +261%. Chinese 10 Year rates are up only +3.3% over the same period, which has been beneficial to our positioning.
All of the above reinforces our view that now is the time for nuanced and tactful positioning across asset classes. A relatively higher inflation and interest rate environment would be no bad thing for the Value Equity, China Bond and High Yield components of our portfolios, and would also likely be supportive of our recent decision to overweight UK Equity in lieu of the tech-dominated US market.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of [Date of Publication].
© 2021 Beaufort Investment. All rights reserved.