Investment Markets suffer falls across the globe following further Emerging Market concerns, alongside the continued trade war effect of protectionism

The MSCI Emerging Market Index of Shares extended its slide towards the bear market levels.

In an article produced by Bloomberg News earlier today – Click on following link for more information:

https://www.bloomberg.com/news/articles/2018-09-05/emerging-market-contagion-fears-deepen-rupiah-in-cross-hairs

 

FTSE 100               7370.29 (-0.18%) @ 13.04 6/9/18
FTAS                      4066.47 (-0.20%)
Dow Jones          25974.99 (+0.09%) last close

Sameer Goel, Head of Macro Strategy for Asia at Deutsche Bank AG in Singapore states “it’s no longer about EM Fundamentals” in the interview with David Ingles.  “It’s increasingly about contagion which largely happens because of cross holdings and the pressure of redemptions”.  Dollar strength continues to expose Emerging Market weakness.

We hold the best quality funds in the sector, such as JPM Emerging Markets and Baillie Gifford Emerging Markets Growth, so although down over 12 months, have delivered against sector and peers.  We will continue to review the position and report to you accordingly.

Investment Week Headline 3/9/18

‘Bull markets do not die of old age’
Industry commentators were cautiously optimistic that US equity markets’ record breaking ‘Bull run’ still has ‘some way to go’ but warned that factors such as interest rates rising too quickly or a full-blown trade war with China posed the largest threats, but, is the bull about to enter the China Shop?

US President, Donal Trump’s Tax Cut and Jobs Act reform, which saw corporation tax cuts from 35% at the start of the year to 21% also boosted the US markets as investor sentiment was strengthened.

Volatility remains and increases

2018 has returned to the markets producing global volatility (the ups and downs becoming more pronounced) following 2017, a year of next to no volatility relative to the expectation.

Market timing, as always, is for traders, not long-term investors, who are looking to preserve the buying power of their capital in pensions and other longer-term savings plans and products, such as Stocks and Shares ISAs and Collective Investment Accounts.

As we say to all of our clients, the old adage of ‘time in’ rather that ‘timing’ must always be the focus when making investment decisions in a suitable asset allocated investment model.  (This type of investment structure is constructed with risk tolerance in mind – often graded 1-10, 1 being cash like holdings; 10 being at the highest end of the risk spectrum, which is how we construct our solutions).

Risk Model Portfolio Review

We have been reviewing the construction of the funds held in the risk models where the results have been strong against the relative benchmark.  We are likely to be considering making a fund change, so we will fully engage in the process of reporting prior to conclusion, providing KIDs and cost benefit appraisal.

We are meeting tomorrow with Woodford Asset Management in order to gather assurances over an improvement to results.  I will update you after the meeting with views in due course.  (We hold the Woodford Equity Income fund in 1-3% of the relative risk models, so exposure is not large).  I never thought I would be contemplating not recommending Woodford as a constituent holding in an investment programme.  This demonstrates that even the fund managers with a stellar track record can fall off track.  I suspect Woodford will seek a turnaround period and assure us that his economic calls will come good, as he is a long-term investor….  I will provide a summary as many clients have asked questions about his fund.

Institute of Public Policy Research (IPPR)  – calls for a major overhaul of Britain’s economy

I am sure a number of our clients and blog readers are familiar with the headlines made by the IPPR report.

We thought we would provide a link to the Think tank’s call for a major overhaul of the economy – There is a huge amount of content and information to read so we thought we would provide the links for you to read at your leisure – https://www.theguardian.com/uk-news/2018/sep/05/thinktank-calls-for-major-overhaul-of-britains-economy

The reforms are a worthwhile read for the financially informed, which is why we recommend you take the time to read up on the progressive overhaul in the report.

The IPPR Commission on Economic Justice, which includes the Archbishop of Canterbury, Justin Welby, senior business leaders and economists, found that the UK is being held back by a business culture dominated by decades of short-term profit taking, weak levels of investment and low wages.

Among the reports’ 73 recommendations are a £1 increase in the minimum wage; the replacement of inheritance tax with lifetime gift tax and greater economic devolution across the UK.

(We may be very active with further ‘advice’ in due course!).  Watch this space……

The report argues that the shareholder-driven model of capitalism is outmoded and partly to blame for Britain slipping down international league tables for investment and productivity.

We append a number of articles –

‘Prosperity and Justice’: A plan for the new economy – The final report of the IPPR Commission on Economic Justice – https://www.ippr.org/research/publications/prosperity-and-justice

A Plan for the New Economy – Executive Summary –  https://www.ippr.org/research/publications/prosperity-and-justice-executive-summary

Fairer Tax for a Better Economy (May 2013) –  https://www.ippr.org/research/publications/fairer-tax-for-a-better-economy


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