Monthly Market Update - March 2019

Read our full Monthly Market Update March 2019

  • The global economic slowdown persisted, with conditions in the manufacturing sector further deteriorating, especially for exporters. However some improvement in the service sector and evidence of inventory depletion give hopes for cyclical economic rebound.
  • Risk asset divergence, a theme of the previous quarter, seems to have abated, as US risk assets underperformance closed part of the gap with Europe and Emerging Markets. Oil prices rebounded somewhat in the beginning of the year, but overall investors worry more about deflation rather than inflation. New orders have been consistently slower, especially when it comes to manufacturing export, suggesting the slowdown is broad-based.
  • Meanwhile trade wars, an uncertain Fed, Brexit uncertainty and growing suspicions of a sharper than anticipated Chinese slowdown, along with the fact that the cycle is entering its tenth year, continue to unnerve investors, causing more profound bouts of equity volatility such as the one last December.
  • Global equity valuations have returned above historical averages, especially in the US.
  • Given the extent of uncertainty surrounding Brexit we remain cautious on the UK, as lower valuations are still justified by the overall slowing growth. Otherwise, we have no strong geographic preferences, favouring large-caps overall.
  • Last December our investment committee maintained its “equal weight” stance, while significantly reducing exposure in absolute return funds as we feel that potentially higher volatility could affect performance. In September, we reduced our weight in Emerging Markets and European equities, investing the money in UK and US small caps. We still believe that the cycle, for the time being, remains intact but it is showing signs of maturity

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