Investment Note

Market Insights 2016


Message from the CEO

'I can't change the direction of the wind, but I can adjust my sails to always reach my destination.'- Jimmy Dean, 1928 - 2010
 

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Trick Question: Yes or No?

     “People vote not on the question, but on the people who ask the question.” 
                                                                                                                   -Winston Churchill

 

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The markets aren’t having it

Capital is a coward. At the first sign of trouble (everyone calls it “uncertainty” these days) it bolts for the door. It’s what the majority of the media and politicians warned us would happen if Trump won. It sounded plausible and all appeared to be going to their script in the small hours of last Wednesday morning when it became apparent that Trump’s victory was nailed on. But the markets weren’t having it. 

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Trumped!! By the state of Florida!!

The US electorate have spoken and the world is a more volatile place this morning.  Is it the dawn of Mad Max.....or simply the dawn of a new era in politics?  For the second time in 2016, and after the shock of the Brexit vote, an electorate has overturned the establishment and made it clear (well by a simple majority) that the road ahead needs to be considered differently.  It lay ultimately with the state of Florida to give the Free World its new leader – who would have thought that?

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Welcome to Florida

“Good morning. I’m Al Gore and I’m the former next President of the United States.”  -   Al Gore, Tokyo, 2006
                                                                                                                               

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Clinton - Off the hook... or is she?

After the dust had settled on the third presidential debate, Hillary Clinton had secured herself a comfortable 8% lead in the polls and global markets broadly relaxed any thoughts about Donald Trump taking residence in the White House. However, as is often the way, the story didn’t end there...

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Playing the endgame

"The problem with political suicide is that you live to regret it"  -  Winston Churchill 
 

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Riding high under a clear blue sky

This time last year, the UK’s stock market was at a similar level to today and pretty much where it had been sitting calmly for over a year. International bond and currency markets were relatively sanguine; all playing along nicely to the script written by the US Federal Reserve. Improving economic data, supportive central banks and some temporary relief from eurozone woes, courtesy of the sacrosanct European Commission holidays, added to the general feeling of a classic stock market summer daze.

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No time for gambling on red or black

 “There is a very easy way to return from a casino with a small fortune: go there with a large one” 
                                                                                                                                         - Jack Yelton
                                                                                                                                                              

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Property funds - The gate escape

We received news yesterday of the suspension of trading in the M&G Property and the Standard Life Ignis UK Property funds. The managers of both of these funds have taken the decision to close, or “gate”, the funds in order to stop redemptions depleting the cash in the funds to a point where they would become forced sellers of property assets; the real bricks and mortar properties in which they are invested around the UK. 

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Osborne sets the record straight…

“I should think it hardly possible to state the opposite of the truth with more precision” – Winston Churchill

They say economists add a decimal point to show they have a sense of humour and so maybe they had a hand in George Osborne’s forecast that, within two years, the UK would face a recession and minus -3.6% contraction in GDP. 
 

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OUT!

“Look, I think it’s entirely sensible for David Cameron to stay on. But as long as he’s gone by 10am, I’m happy.” 
                                                                                                                                                  Nigel Farage 7am, 24th June 2016

 

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Echoes of a proper crisis

When I heard on the radio yesterday morning that a “famous currency trader” had warned that if Britain voted to leave the EU, Sterling would suffer a fate even worse than Black Wednesday in 1992, I did wonder how old this trader must be.  Almost everyone I knew who was trading anything back then has long since hung up their red braces for an easier life. 

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Blue on blue, red on red and the man on the Clapham omnibus

“Brexit camp in turmoil as leading Tory defects” – Front page headline, The Times, first edition, 20th June 2016.
 
“Brexit camp divided as senior Tory walks out” – Front page headline, The Times, second edition, same day.
 

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Playing it safe

It’s often the case that some of the most thought provoking comments come from unexpected sources. It was actually the director of bonds at Rathbones, who also sits on the Bank of England’s Debt Management Office consultation committee, who reminded me the other day of the simple fact that in every year since the Global Financial Crisis (GFC) of 2008, the FTSE 100 Index has fallen once at least 10%. 

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Bremain

The last day of May has usually been a time to sharpen one’s pencil to write a review of whatever what was to blame for the often recurring stock market phenomenon of sell-in-May-and-go-away. Not this year. There’s almost nothing at all in the newswires for markets to get excited about. Indeed, even the keenest cricket fan might’ve been surprised to see the front cover of Tuesday’s FT leading with England captain Alistair Cook becoming the youngest player to score 10,000 runs in test cricket. 

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Mixed emotions

“Mixed emotions, buddy. Like Larry Wildman going off a cliff in my new Maserati.”  
Gordon Gekko, Wall Street, 1987

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Review of the First Quarter 2016

The year started with a number of new statistical records, not least of which was the US stock market suffering its worst start to the year since 2001. Of course, as is almost always the case in today’s globalised world, the concerns stretched further afield and, in this case, China was held up as the culprit with their central bank being accused of indulging in the new cold war of currency manipulation....

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When all think alike, no one thinks very much

"When all think alike, no one thinks very much" - Albert Einstein

With 2015-2016 leaving nowhere to hide for fund managers accused of being index trackers, and following on from my recent missive on the failures of index trackers in today’s market environment, one hopes that clients are quickly wising up to what they are paying for, and what that service truly represents.

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Universally Challenged - who is smarter?

"[Central Banks] think they are smarter than the market" – Jim Rogers, February 2016

From ZIRP to NIRP – (From zero to negative interest rate policy)

 
 

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TAM's Outlook for 2016

It would be easy to convince anyone that 2016 is going to be more difficult than last year.  The list of dreads threatening to derail stock and bond markets is pretty much the same as before but we are at least closer to understanding the end game of the post 2008 “Great Financial Crisis” as the US Federal Reserve start what they believe to be a year of interest rate hikes. 

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So far, so bad

It’s a good week for top drawer statistics and there are so many, it’s hard to know where to start. Sterling has hit a 5 ½ year low against the US Dollar. The Eurostoxx 600 Index has had its worst week in four years.  The FTSE has posted its worst first week since the year 2000. The Japanese stock market has had its worst opening week since 1949. And trumping them all, the New York’s S&P500 has put in the worst 5-day start to the year…ever. 

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