Investment Committee 05/03/2019
- 5th March 2019
- Posted by: Celticfp
- Category: Investment Committee
Brexit is still here, but it’s not the biggest issue out there! A major headwind is the US vs China Trade negotiations. Both are titans of the world and whilst their threats could destabilise global trade massively, their approach with each other appears to be softening. So, this said the (economic) glass is very much half full whatever your view of the world is…
It feels like the recent market turbulence has helped remind us once again how quickly markets can move. For example, as we write this and look at the FTSE100 it is up around 6.20% year to date, that’s symbolic across many world markets.
If we first look at the US which drives a lot of the world markets, we see the Dollar has started to weaken. Much of this can be attributed to the fact President Trump appears to have played all his cards too soon in terms of economic reform and has nothing left up his sleeve, or has he? A weaker dollar is good news for the world especially emerging markets.
In summary we believe the US has started to come towards the end of its economic cycle. Therefore, we continue to be a cautious underweight holder of US equities. This view is echoed by many fund houses who have started to reduce their exposure to US stocks.
As for the UK we have finally started to see the pound strengthen and we have seen lower levels of unemployment and inflation.
We still firmly believe that the UK and Europe offers great potential moving forwards. It is key however to ensure our exposure is aimed at the domestic market who are the biggest winners from lower inflation and some wage growth. International companies will find it harder as the pound strengthens making their exports more expensive, so we need to ensure we position portfolios accordingly.
What are the biggest threats to world markets in 2019?
- The slowing down of the US and worsening trade relations and conditions with China
- Fear itself. As people get worried, they pull back on making investments
- Unforeseen issues with domestic and government debt
That said potentially 2019 could be a recovery year however, we would need to see more cooperation from politicians to help move forward with reform. It is only China that is being dynamic, but it can’t keep dragging the world along by itself. It needs willingness and help from others.
As an asset class Cash is still very poor value and losing money in real terms against inflation. Given good dividend yields and compressed bond yields, we believe equities are the best place to be.
It is our view that total returns from UK Commercial Property in the south will be negative going forward. A correction in Property is long overdue. Rating agencies have started to make noises that they are concerned about Property valuations. We still feel we are right to avoid potential liquidity issues caused by any downturn and sell-off in the Property market and so we will continue to shy away from Property exposure. In summary we feel Property won’t uplift our portfolios enough in order to dive in with both feet!
This Article is for information purposes only – should not be perceived as financial advice. We recommend you should always speak to a financial adviser before making any investment decisions.
Please note past performance is not reliable indicator to future returns.
Your investment may fall as well as rise and you may not get back what you put in.