That was the year that was
‘My life is better with every year of living it’ – Rachel Maddow
With the end of the year nearly upon us, time to reflect on financial markets in 2018…and beyond.
If there was one big financial markets theme for 2018 it was not to buy and forget about investments. It has been noted by many financial commentators over recent weeks that few assets have beaten returns from cash in the bank during the year. This reflects a confluence of issues coming together which have impacted equity, bond and property markets. The key is the twin pincer movement of lower growth and higher interest rates. Neither are disastrous individually versus history. Economic growth rates have slowed but the world is far away from slipping into recession. However it is fair to say that the building angst over world trade issues has raised the threat of this. This has certainly hurt many global equities during the year, especially in Europe and Asia.
Meanwhile higher interest rates have induced a clear sector rotation in equity markets. A rise in the rate of interest – or the associated bond yields which have meant most fixed interest markets have not made money during the year and increased pressure on global property markets – have meant that growth stocks have progressively fallen out of favour during the year, as best reflected by the decline in US technology sector prices during the last few months.
Putting all this together there is little surprise that investor sentiment has soured during the year, a trend augmented by other current uncertainties such as Brexit. So what should investors do about it?
As we have talked about frequently during the last year, we believe investors should be prepared to be more active with their investment choices, especially in equity markets. We have purposedly focused the methodology of the Global Dynamic Opportunities Fund to be more flexible and active, centred on the notion of looking for anomalies where there is a difference between how investors perceive an equity and the actual fundamental underlying reality. With the aforementioned concerns around world trade, Brexit and higher bond yields swirling around, we believe opportunities for this strategy will remain strong. Reflecting this, since inception the unweighted average cash return on twenty-six wholly or partially completed trades by the Global Dynamic Opportunities Fund has risen to an average of 11%. We continue to anticipate further progress in this metric over the next twelve months, especially as there are tentative signs of compromises in both the world trade and Brexit debates.
And finally…an investment related joke to end this year’s updates:
Q: ‘Why did the economist choose not to send out any Christmas cards?’
A: ‘Because there was insufficient demand!’
Merry Christmas and a Happy New Year to all readers.
Chris Bailey, Chief Investment Officer
By focusing on ‘Anomaly Investing’ (i.e. stocks that have fallen excessively in price either for no obvious reason or for reasons that are no longer applicable) the Fund offers something different within a broad-based portfolio of investments. The current NAV represents a discount for new investors as well as a reminder that price movements require the Fund to be classified as Medium to High Risk despite the liquidity and safety of our selecting stocks of companies with a market cap of $1bn or more and listed on major exchanges. As a UCITS Fund, it is eligible for ISAs and SIPPS. For existing Daniel Stewart clients the easiest way to invest is via your relationship manager but the Fund is also available via the Transact and AJ Bell’s YouInvest platforms.
Chris Bailey, Chief Investment Officer www.dynamicopportunitiesfund.com
If you would like more information regarding investment in the Dynamic Opportunities Fund and already have an account with Daniel Stewart please contact your regular broker. Otherwise click on the link below.