Driven mostly by gains in the US equity market, global stocks saw their largest quarterly gains over Q1 2019 since 2010. January was the best month for global equity markets in more than seven years amid strong corporate earnings results across the board and optimism over the US-China trade talks. US equity market strength was boosted by comments from the US Federal Reserve (The Fed) that it would put further interest rate increases on hold. While the US equity market posted its best month in three years, the UK equity market provided the first month of positive returns since the third quarter of 2018.
Trade continued to dominate global markets in February as the US raced to reach a deal that would avert a tariff increase on Chinese goods. Fading fears of a global recession in 2019 improved sentiment and news that Donald Trump was closer to accepting a Mexican border spending deal, averted another government shutdown and helped support the global equities markets. Global equity markets climbed in March to end the first quarter in positive territory amid hopes for progress in US-China trade talks and optimism that the US Federal Reserve would remain less aggressive in raising interest rates.
With the pause in U.S. Federal Reserve interest rate hikes, we hope to see a modest recovery in global cycle conditions later this year, but any signs of a more pronounced growth slowdown in this late cycle or new trade disputes could create uncertainty and more volatility in the markets this year. At such times, Investors need to remain focused on their longer- term goals and Burton & Fisher can support you through this process with our regular reviews of your investment strategy and cash flow requirements.
The following chart reflects the performance of the MSCI World index over the year ending 5th April 2019, rising approximately 14% over the period, in sterling terms, pulling back in 2019 from the downward trend experienced over Q4 2018.
The MSCI World is a market cap weighted equity market index of over 1600 stocks from companies throughout the world, although excludes companies in emerging and frontier markets. It is a widely used benchmark to assess how equity markets have performed globally.
The US equity market ended Q1 2019 in positive territory amid hopes for a trade deal between the world’s two largest economies, US and China and optimism that the US Federal Reserve (Fed) will remain less aggressive in raising interest rates.
The Fed said that it would be patient on interest rate moves and signalled flexibility in terms of reducing its balance sheet. The less aggressive statement helped ease fears that policy makers would continue with plans to raise interest rates even in the face of data suggesting that the economy is cooling. The forecast from the Fed that it will not raise interest rates this year — and market expectations it may even be forced to cut them — encouraged optimism around the so-called ’growth’ stocks (companies whose share prices are already inflated relative to their earnings or the value of their assets) whose share prices fell at the end of 2018 when it was assumed that the Fed would continue to raise interest rates. Tech stocks, in particular, were the best performing sector last month.
In terms of corporate news, some US megadeals turned the first three months of 2019 into the second strongest start to a year for deal-making since the turn of the century. Lyft Inc., the ride-hailing company, surged in its debut after investors rushed to participate in the first big US technology listing this year. Furthermore, Fidelity National Information Services’ US$43bn purchase of payments group Worldpay is the biggest financial services takeover since the global financial crisis in 2008.
On the macro-economic front, solid US growth numbers in February reined in fears of an economic downturn arriving this year and the delay to an increase in American tariffs on Chinese goods buoyed investor sentiment further. US inflation numbers bolstered the US Federal Reserve’s decision to be patient on raising interest rates. And with major central banks seemingly on pause or turning less aggressive, investor attention in February focused on the outlook for global trade and the chances of progress at the next round of talks between the US and China. Hopes did rise in March and this supported the US equity market. Throughout last week, US-China trade talks dominated headlines once more, with a final deal appearing to move ever closer. The news buoyed investment markets, particularly alongside the release of improving Chinese economic data.
The chart below highlights the performance of the American Stock Market index S & P 500 over the quarter period to 31st March 2019 and represents a recovery period, after a volatile quarter experienced over Q4 2018.
The S&P 500 closed at a level of 2834.40 on 31st March 2019, rising approximately 13% over the Q1 2019 period.
UK equities performed well over the month of January, although lagged global equities as the market’s significant defensive components limited the upside. Sterling strength was another headwind which held back the more internationally focused FTSE 100, which rose by 3.6% over the month.
The weaker performance compared to global equities was partly a function of the UK large caps having outperformed at the end of 2018. That was when fears around the outlook for the global economy, future path of US monetary policy and political uncertainty reached a head. Sterling bounced back in January as hopes built that the UK would avoid a “no deal” Brexit.
The UK stock market performed well over the February period, although again lagged global equities as sterling strengthened amid growing hopes that the country would avoid a disorderly Brexit. Many domestically focused areas also extended their recent recoveries, further helped by some better-than-expected data. Data released in February indicated that the UK labour market had bucked a wider slowdown in the economy during the fourth quarter of 2018 while nominal wage growth remained robust. The Office for National Statistics also revealed that UK inflation had fallen to a two-year low in January and that retail sales had bounced back strongly from a poor December.
Overall, UK equities rallied over the Q1 2019 period, with almost all areas of the market bouncing back from a very poor Q4 2018. Against an increasingly uncertain outlook for the global economy, equities perceived to offer superior and defensible earnings growth outperformed.
In addition to these trends, a number of lowly-valued, domestically-focused areas bounced back strongly following the delay to Brexit beyond March 2019. This development fuelled hopes that a disorderly exit from the EU could be avoided. UK employment growth remained robust. Nominal wages continued to pick up as the UK labour market bucked a wider slowdown in the economy and real wages remained in positive territory as inflation data was muted.
In economic news the Chancellor of the Exchequer issued his Spring Statement mid-month, highlighting that the UK economy has been “remarkably robust” since the vote to leave the EU in June 2016. However, the Bank of England’s Monetary Policy Committee voted unanimously to maintain UK interest rates at 0.75% during its March meeting, stating that the UK economic outlook will continue to depend significantly on the nature and timing of EU withdrawal, in particular: the new trading arrangements between the European Union and the United Kingdom; whether the transition to them is abrupt or smooth; and how households, businesses and financial markets respond.”
The question of the UK’s departure from the European Union continued to dominate the agenda during March. As we moved closer to the original exit date scheduled for 29 March 2019, currency markets continued to watch political developments closely. Sterling peaked at 1.33 versus the US dollar mid-month, as UK Parliament voted to reject a no-deal Brexit scenario and seek an extension of Article 50 from the EU. However, Parliament’s subsequent rejection of all alternatives to the Prime Minister’s deal saw the domestic currency weaken against both the US dollar and euro. After securing an extension from EU leaders, UK Parliament voted for a third time on the Prime Ministers deal. The vote, which took place on the UK’s original exit date of 29 March 2019, was lost as Parliament voted again to reject the withdrawal agreement. The political impasse therefore continued in to month end and the process remains ongoing, with EU leaders granting a six month extension to Brexit, if required.
UK Equities (continued)
The chart below compares Sterling against the Euro over a five year period ending 9th April 2019. Sterling has been called the Brexit barometer and depreciated significantly against the Euro in June 2016, when the Brexit vote was announced. It is currently trading around the 1.16 Euro mark, strengthening over the Q1 2019 period. When markets feel that the likelihood of a hard Brexit has increased, this tends to weaken Sterling and vice versa.
The chart below highlights the performance of the UK index FTSE 100 over the quarter period to 29th March 2019 and reflects that recovery in the value of many of those international companies listed. The FTSE 100 closed at a level of 7279.19 on 29th March 2019, rising approximately 8.2% over the Q1 2019 period.
UK Equities (continued)
In corporate news, Tesco reported its best Christmas sales growth in nine years during January, but later announced that up to 9,000 jobs would be put at risk as part of continued efforts to cut costs in a challenging market.
Elsewhere in the high-street, January proved another challenging month for Debenhams, which has now fallen into administration. The company hit the headlines again following its Annual General Meeting, at which the firm’s two largest shareholders, including Mike Ashley the owner of Sports Direct, voted against the chairman and Chief Executive’s re-election to the board.
Marks & Spencer announced a joint venture with Ocado during February. ITV and the BBC also announced a joint UK streaming venture, aimed at rivalling media disruptors Netflix and Amazon Prime. Elsewhere embattled cake chain Patisserie Valerie was rescued from administration, whilst sub-prime lender, Provident Financial received an unsolicited bid (when an investor seeks to purchase a company that is not looking for a buyer) from competitor Non-Standard Finance.
In March, JD Sports announced a deal to consolidate its ownership of rival Footasylum and embattled department store Debenhams secured agreement from its lenders to seek refinancing. Clothing retailer Superdry faced a boardroom challenge from its founder and ex-Chief executive, who launched a bid to return to the company’s Board of directors following a period of weak share price performance. Elsewhere in the retail sector the potential merger between Sainsbury’s and Asda was back in the news as the supermarkets announced they would sell up to 150 stores to meet regulatory requirements for the merger, while Majestic Wine announced plans to close stores and rebrand as Naked Wines.
Despite mixed economic data, Eurozone equities enjoyed strong gains over Q1 2019, rebounding from weakness at the end of 2018.
The eurozone economy grew 0.2% in the fourth quarter of 2018, bringing the overall growth rate for the year to 1.2% and while still positive, it was well below the 2017 rate. However, it should be noted that some of the recent economic data has been distorted by one-off or rare events, including new testing regulations leading to a fall in car production, extremely low river Rhine water levels causing a disruption in transport of goods, and the ‘Gilet Jaunes’ protests in France, which stemmed from fuel tax rises last year. Furthermore, Italy fell into a technical recession in January, after the economy shrank by 0.2% in the fourth quarter of 2018, following a 0.1% decline in the third quarter.
Elsewhere in the EU, Spanish Prime Minister Pedro Sánchez called for a snap election, two days after parliament rejected his government’s 2019 budget proposal. Financial markets largely ignored the news given this will be Spain’s third general election in only four years. Essentially, any outcome from the election is unlikely to lead to major change in economic policy. However, this does add to the already congested political calendar with the ongoing Brexit negotiations, European Parliament elections coming up in May, and an array of state and regional elections throughout the Eurozone this year.
The European Central Bank (ECB) cut Eurozone growth forecasts in March and revised their guidance to now leave interest rates unchanged “at least to the end of 2019”. Following the ECB announcement, the stock markets pushed out the probability of an interest rate rise from mid-2020 to early-2021. Unsurprisingly, financials were hit hardest by this news given the impact of negative deposit rates on banks’ earnings whereby they are essentially paying the ECB to hold excess cash. Meanwhile, investors rushed into non-cyclical sectors (that tend to outperform when economic growth slows) and defensive sectors (that provide steady earnings despite economic performance) such as Consumer Staples, Utilities and Health Care, all of which performed strongly.
In Germany, the Manufacturing component of the flash PMI (Purchasing Managers Index) dropped to its lowest level since at the peak of the Sovereign Debt Crisis in 2012, while the Services component of the flash PMI rose once again. The inverse move suggests that it is likely external factors such as a Chinese economic slowdown, trade wars and Brexit are causing issues for the export-heavy economy. The fear for many will now be whether external weakness could eventually influence domestic market sentiment and negatively impact consumer spending and business investment, although recent economic data from China has been better than expected.
European Equities (continued)
The chart below highlights the performance of the European index Euro Stoxx 50 over the quarter period to 29th March 2019 and again highlights the recovery, after the market downturn experienced over Q4 2018. The Index was designed to be a ‘blue chip’ representation of 50 leading companies in the Eurozone. The Euro Stoxx 50 closed at a level of 3351.71 on 29th March 2019, representing an increase of approximately 11% over the Q4 period.
Global equity markets regained some ground in the first quarter after the sharp falls at the end of 2018. However, the Japanese equity market return of 7.7% was somewhat muted compared to other developed markets, and the gradual uptrend was punctuated by some significant individual daily declines. The Japanese currency weakened against other major currencies, retracing some of the extraordinary strong moves it made in late 2018 and the early days of 2019.
Japanese equities lagged over January as weaker Chinese growth and US-China trade disruption saw a drop in December exports. Factory output was also lower in December, down 0.1% month-on-month
– the seventh monthly drop in nine months – which weighed further on investor confidence.
In February, Japanese equities were also buoyed by improvements in US-China talks, with export-dependent sectors benefitting as investors shrugged away concerns over weaker economic data. Japanese manufacturing activity, for example, fell in February at the fastest pace in over two years on lower export orders.
Japanese equities were generally lower over March as corporate earnings growth forecasts remained negative. Japanese economic data released in March was generally in line with expectations. Headline inflation was actually slightly ahead of forecasts with a broadening range of categories seeing some increase in prices. The Bank of Japan’s quarterly ’Tankan’ survey showed a deterioration in corporate confidence due to uncertainties in the global economy and financial markets, as well as uncertainties due to global trade disputes which have greatly affected Japan’s export sector. And while the manufacturing PMI came in at 49.2 compared to 48.9 in February, it still showed that the broader manufacturing sector was in contraction. Retail sales growth was also lower than market expectations.
Whilst Japan’s equity market has lagged global equities in 2019 due to a downturn in local economic indicators and a general lack of inflation, our preferred Managers remain optimistic on the longer-term outlook and a resolution to the US– China trade negotiations would be positive for the Japanese market. Over the shorter term, the abdication of Emperor Akihito in May will attract widespread coverage in coming weeks. Although not a significant economic event in itself, there could be a temporary boost to consumption and tourism triggered by an unusually long Golden Week holiday announced to honour the event. Furthermore, the summer Olympics are to be held in Japan in 2020 and this may well bode well for economic activity and market sentiment in the shorter term.
The chart below highlights the performance of the Japanese TOPIX index over the quarter period to 29th March 2019 and reflects that equities rally trend over Q1 2019 as seen in other developed markets, such as the USA, but recovery has not been as strong. The TOPIX Index closed at a level of 1591.64 on 29th March 2019, representing an approximate 6.5% increase in the index level over the Q1 2019 period.
The chart over one year below, highlights some recovery in TOPIX levels over Q1 2019, but this has not been as strong when compared to global equities above.
Asia Pacific (Ex Japan) Equities
Asia ex Japan equities rebounded strongly from the sell-off in the previous quarter. The MSCI Asia ex Japan index posted double-digit gains though it slightly underperformed the MSCI World index. All markets in the region closed higher, helped in part by progress in US-China trade negotiations. The dovish shift by major central banks also boosted sentiment.
Global growth concerns remained a drag, however. In particular, China’s economy grew at its weakest pace since 1990. January-February data pointed to a continued slowdown. The Chinese government lowered its full-year growth target to 6-6.5% and outlined higher public spending and tax cuts, while the central bank provided stimulus, with a cut to the reserve requirement ratios for banks.
Against this backdrop, markets in China and Hong Kong fared best. Aside from easing trade tensions, Chinese stocks were further buoyed by index provider MSCI’s move to increase the weighting of China-listed shares in its benchmark indices. Gains were also fuelled by anticipation that Chinese authorities would continue to introduce supportive policies to counter the economic slowdown.
Elsewhere, Taiwanese stocks also advanced. Indian markets were pressured by geopolitical tensions with Pakistan, but they staged a late rally on optimism that the current coalition government would return to power in upcoming elections. South Korean stocks underperformed amid the abrupt end to the US-North Korea summit and concerns over corporate earnings. ASEAN (Association of Southeast Asian Nations) markets also trailed the broader region. Malaysia and Indonesia were the biggest laggards. The Philippines and Thailand fared better though the latter was held back by uncertainty surrounding the election outcome; official results are not expected until May.
The total return chart below highlights the performance of the MSCI Asia Pacific index over the quarter period to 29th March 2019. The Index increased in sterling terms, climbing back by almost 9% over the Q1 2019 period, after declines of almost 6.5% over the previous Q4 2018 period, a period that experienced heightened volatility, as summarised in our previous quarterly report.
Asia Pacific (ex Japan) Equities (continued)
Focus on Indian Equities – Review of Indian Equities over Q1 2019
India was the worst performer over January, with autos, auto parts, machinery and equipment, cement and steel particularly affected. Investor sentiment dwindled due to concerns over corporate earnings and corporate governance issues. Weaker macroeconomic data, including December CPI (Consumer Price Index – a common measure of inflation) of 2.2% against the Reserve Bank of India’s target of 4%, also added to downward pressures ahead of the government’s budget for 2019-20.
Indian equities ended in February slightly lower as investor concerns remain over earnings and corporate governance issues. While the India growth story continued to look positive, the near-term economic outlook was mixed: gross domestic product (the measure of goods and services produced) rose 6.6% in the fourth quarter compared to 7% the previous quarter, forcing the central bank to shift policy to a more neutral stance, where interest rates and inflation remain relatively stable. Clashes with Pakistan in an election year have further weighed on confidence.
Indian stocks enjoyed a pre-election rally, posting their best monthly gains since 2016 as early opinion polls pointed to a return of Prime Minister Modi’s coalition Government in the upcoming general election. This helped to ease concerns over potential near-term political instability should no clear winner emerge. Indian stock performance was also aided by a slight improvement in economic data: February’s manufacturing Purchasing Managers’ Index (PMI – which measures the productivity and therefore health of an economy), for example, was at 54.3 compared to 53.9 the previous month. Meanwhile corporate earnings growth expectations have also ticked upwards.
The 2019 Indian general election is scheduled to be held in seven phases from 11 April to 19 May 2019. Prime Minister Narendra Modi’s BJP (Bharatiya Janata Party) is battling the Congress party of Rahul Gandhi and powerful regional parties. With 900 million eligible voters, it will be the largest election the world has ever seen.
Emerging Market EM Equities
Emerging markets equities posted a strong return in Q1 2019, led by China. The MSCI Emerging Markets Index increased in value but underperformed the MSCI World.
In China, the Fed’s dovish comments and the US’s decision to suspend tariff hikes on $200 billion of Chinese goods, together with ongoing government support for the Chinese domestic economy, were all supportive. China A-shares were particularly strong as MSCI announced plans to quadruple their weight in the index between May and November. Elsewhere, a rally in the price of crude oil was beneficial for net exporter countries such as Russia and Colombia.
Conversely, Qatar was the weakest index market, as equities fell back after a strong rally last year. This was primarily driven by strong passive flows, which started to abate in Q1 2019. Turkish equities declined and the lira lost value as the government’s unorthodox policy response to the country’s economic problems continued.
The chart below highlights the performance of the MSCI Emerging Markets (GBP) index over the quarter period to 29th March 2019 and reflects the partial rebound in Emerging Market equities, after a difficult 2018 for the sector. The Index increased in sterling terms on a total return basis by approximately 7.3% over the Q1 2019 period.
Emerging Market EM Equities (continued)
Focus on Chinese Equities – Review of Q1 2019
January saw China emerge as the best performing market in the region on the back of easing trade tensions and indications from the central government of plans to stimulate the economy further. Recent economic data was mixed, with full-year 2018 GDP growth at 6.6% against 6.8% the previous year. The official Purchasing Managers’ Index (PMI – which measures the productivity and therefore health of an economy) pointed to an easing in the slowdown of the country’s large-scale manufacturing sector in January, while the PMI for smaller firms contracted. Expectations remained high that the authorities would roll out targeted stimulus measures to shore up economic growth and stabilise near-term outlook.
The improvement in US-China relations in February was again the main performance driver as the two trading partners indicated that they are moving closer to agreeing on a deal which would see the US lifting tariffs and China acting on pledges for greater market reform. The announcement of an extension of the deadline for trade talks helped further raise investor confidence in the region, which saw Hong Kong financials and the Taiwanese technology sector record the biggest gains over the month of February. This boost in confidence also helped China continue to outperform despite mixed macroeconomic data. The official Purchasing Managers’ Index (PMI), that indicates the health of an economy, fell to 49.2 in February from 49.5 the previous month, indicating further slowing of the country’s large-scale manufacturing sector. However, exports beat market estimates, increasing to 9.1% in January ahead of the Lunar New Year holidays, compared to the decrease of 4.4% in December. With a slowdown in the broader economy, expectations remained high that the central government will continue to roll out measures over time aimed at supporting domestic growth.
China’s market recorded its biggest quarterly gain since 2009. Optimism over a possible resolution to trade disputes with the US proved a major factor in performance over the period as both sides indicated that negotiations are progressing forwards. Macroeconomic indicators were also positive with fixed asset investment, industrial production and retail sales all showing signs of improvement. China’s Manufacturing PMI also rebounded to 50.5, reversing previous contractions and indicating improved health in the manufacturing sector (above 50 indicates expansion). The market was further supported by the positive sentiment stemming from the February announcement that global index provider MSCI will increase its weighting of China-listed shares in the MSCI Emerging Markets Index to 3.3% from a current 0.7% by November of this year.
The Bond Markets
Government Bonds performed well over Q1 2019, rebounding following declines at the end of last year. As concerns over global growth mounted, the US Federal Reserve (FED) and European Central Bank (ECB) continued their pivot towards a more accommodative monetary policy to encourage economic growth
The dovish pivot from major central banks proved particularly significant with markets having grown nervous over the prospect of further interest rate rises in the US. The heads of both the Fed and the ECB indicated rates would not rise in 2019. Growth and inflation forecasts were also lowered.
US 10-year Treasury yields fell 30 basis points (bps) over the quarter reaching their lowest level since late-2017. The three-month Treasury bill yield rose higher than that on 10-year bonds in March. This yield curve inversion underlined the growing caution among investors around economic growth prospects.
In European bond markets, 10-year Bund (German government bond) yields were also more than 30bps lower and fell below zero toward the end of March for the first time since October 2016. European economic data weakened further through the quarter, particularly for the manufacturing sector.
Brexit remained the key influence on the sterling bond market. In broad terms, any sign of a delay in the UK’s withdrawal from the European Union helped support UK corporate bonds. At the same time, the ongoing uncertainty helped UK government bond prices to rally, with 10-year Gilt yields at their lowest level since September 2017.
The trend over Q4 2018 & Q1 2019 as seen in the following chart has been one of falling UK government bond yields. Bond Yields rise when bond prices fall. Bond prices fall when there is less investor demand to buy such bonds, reflecting a more ‘risk on’ sentiment by traders in the investment markets.
UK 10 Year Gilt
The Bond Markets (continued)
Inflation-linked bonds have also performed well in 2019 so far. Inflation expectations in the UK have been relatively consistent, while in the USA some bond market indicators point to rising expectations for inflation ahead. The Bank of England would likely accelerate interest rate hikes if a ‘hard Brexit’ is avoided and we therefore hold indexed linked Gilts as part of our core model portfolio holdings.
The global bond sector thus performed better over Q1 2019 as bond prices more than recovered following the price falls seen over Q4 2018. The chart below reflects the Q1 2019 recovery and shows the sector average total returns over 1 year for all the UK unit trusts and open- ended investment companies operating in the Investment Association Global Bond sector.
The Q4 2018 RICS UK Commercial Property Market Survey results continue to display mixed fortunes across the three traditional sectors, namely office, retail and industrial. Indeed, the strong performance of the industrial sector remains in stark contrast to that of retail, driven by the structural shift in consumer spending habits. Meanwhile, survey participants continue to highlight political Brexit uncertainty to be holding back activity, with the lack of clarity causing decisions to be delayed. Tenant demand for retail space is still falling, contrasting with growth in the industrial sector. Industrial is the only sector displaying positive rental and capital value expectation in the near term. Prime office rents are still anticipated to rise in the year ahead, although expectations have now turned marginally negative for secondary offices.
For the first time on record, a clear difference has emerged in the Central London office market between the performance of new office space and secondhand office space, according to the latest report by property advisors, CBRE. Secondhand space – defined as space that is not newly completed, is not under construction or has not undergone major refurbishment before being marketed – is undergoing a supply and demand imbalance resulting in a divergence in rental values between new and secondary office accommodation for the first time. Prime office rents are therefore expected to rise over the next five years while secondary rents are expected to fall over same period.
In the physical market, UK commercial real estate had a weak start to the year. January and February combined saw growth in rents and capital values for both office and industrial properties but this progress was more than offset by capital value declines for retail premises where investor sentiment has further deteriorated in the face of falling rents.
Burton & Fisher continue to support our specialist property fund managers, who we feel can identify those opportunities ahead and allocate to sectors accordingly. These now include commercial property opportunities overseas, via FCA authorised and regulated funds, domiciled in the UK.
Crude oil prices rebounded from a sell-off in Q4 2018, see chart below of the Brent Crude oil price, closing at just over $70 per barrel on the 9th April 2019. Production cuts from OPEC and other oil producers, together with the implementation of US sanctions on Venezuela, served to tighten the oil supply, thus driving up the price. The oil price has rebounded since the end of last year, having its best quarter since 2009 – amid signs of thinning supplies from Siberia to the US shale fields. Russia, Saudi Arabia and other top exporters have squeezed production in response to a growing oversupply, while sanctions against Venezuela and investor pressure on US shale drillers added to signs of a tighter market (restricted supply).
Industrial metals also moved higher amid positive signs emanating from US-China trade talks. By contrast, precious metals recorded a modest gain over Q1 2019, supported by a small rise in gold prices over the Q1 2019 period.
Burton & Fisher Model Portfolios
Given the possibility of further volatility in the markets this year, it is important to have a spread of investments to minimise the investment risk and our model portfolios are constructed in order to give access to a wide range of leading fund managers operating in the different sectors around the world. Typically, our portfolios consist of 15 or more collective investment funds and each fund is monitored on a regular basis, in particular to assess the continued suitability of each fund. This entails monitoring the investment performance and volatility of each active fund, in order to assess that they remain competitive and have that potential to enhance longer term returns.
For example, the cumulative performance of the Burton & Fisher model portfolio 5 over the five- year period to 5th April 2019 is shown below. The portfolio is suitable for a person with a low medium investment risk profile. Whilst not insulated from the volatility seen in markets last year, the portfolio has made a respectable return and has outpaced sectors average over period shown. The FTSE 100 index, which consists of many international companies is also shown for comparison.
Unless specified otherwise, the performance figures shown in this report are supplied by FE Analytics and only serve to show how the portfolio and wider markets have performed in the past. The past performance data above is based solely on the current allocation of funds and does not reflect changes in funds and allocation over time. Past Performance is not a reliable indicator of future results and the value of investments is not guaranteed and may go up or down. Returns shown above are after fund management charges, but before financial advice and product charges, other charges and taxes where relevant. Price total return performance figures are calculated on a bid price to bid price basis (mid to mid for OEICs) with net income (dividends) reinvested. Performance figures are shown in Sterling unless specified otherwise.
Asset Allocation is based on long-established and well-proven mathematical principles, it involves achieving the correct balance of assets in your portfolio. The universe of investment funds available for you to invest into are categorised under different asset classes depending on their particular focus. Different types of assets have different performance characteristics, so it is very important to allocate the right mixture of funds to your portfolio so that, over time, the peaks and troughs of their performance balance each other out meeting your particular risk and reward expectations.
Burton and Fisher reviews the asset allocation for our clients on a quarterly basis, any changes that we are recommending to the rebalancing of your investment strategy will be communicated to you for your approval. Given the volatility in the markets seen in Q4 2018 and the consensus that we are in later stages of the global economic business cycle, we plan to make some refinements to the portfolio construction over the course of Q2 2019.
The current asset allocation of the Burton & Fisher Model 5 Growth portfolio is shown in the chart below, with approx.60% of the portfolio invested in equities globally, 20% in bonds globally, with the balance in commercial property and money market cash linked investments.
Source: Dynamic Planner 05.04.2019
Burton & Fisher Financial Services is authorised and regulated by the Financial Conduct Authority (FCA) in the conduct of investment business. This document is not investment research and you should not treat this guide as a recommendation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. Some of the market commentary has been provided by a selection of our preferred fund managers.
The value of any investment and the income from it is not guaranteed and can fall as well as rise, so that you may not get back the amount originally invested. Past performance is not a reliable indicator of future results.