Market Commentary – 11th January 2017

What a start to 2017?

For many weeks and maybe even a few months now since Trump was elected as President Elect, we have been conscious of the impact the expected fiscal stimulus and reflation trade will and is having on equity assets and as you will see from the data below, we have had an extremely positive start to 2017 as well as having further clarification from Teresa May that we may start negotiations from a position of hard Brexit with no transitional agreements, and then soften through negotiation. As a result we are seeing equity markets rise and sterling weaken, and today we have, as a result of our view now focussing on a weaker sterling in Q1 than we have today, removed any GBP hedged positions that had faired well in the last three months as well as UK commercial property (M&G and Aviva funds) and added Japan and Asia as the outlook with a weak Yen in the region is very positive. For further detail on all our thinking and data to substantiate, please review the attached Economic Overview. It is also worth noting that as I write the UK and European main indices are up a further 0.8% today and the Dow Jones is looking like it will breach the much anticipated 20000.

 

Portfolio & Indices Performance YTD

As you will see, the portfolios and the indices have had a great start to 2017 and in direct comparison to 2016 this is a welcome relief. HSBC Global Property from a non equity perspective has given the biggest contribution closely followed by Blackrock NURS II and 7Im Unconstrained Absolute Return fund, and then high yield noting all positons have added to the returns. From an Equity perspective the Invesco Perpetual Global Opportunities fund closely followed by Old Mutual Voyager have delivered nearly 4% and 3% each YTD. All positions, as with the non equity, have added towards the overall contribution with no assets in the portfolio delivering a negative return in the first six trading days of the year.

 

This cannot continue though and we will watch closely, because if the markets get ahead of themselves and the data flows do not substantiate earnings expansion then it will stall, and the further assets rise the less they can rise and the more we would look at taking profits. We are okay for now though and will evaluate constantly and make decisions as we always do to balance the risks, and even if assets are expensive if momentum is driving them higher, we will take the trade.

 

Have a great day / week and I look forward to bringing back the barometers next week – long may the asset rotation and “risk on” period continue.

VBW

Jason

Jason Stather-Lodge  CFP, MCSI, APFS

CEO & Founder
Chartered & Certified Financial Planner
Chartered Wealth Manager