February 2018 Performance
The long overdue correction in global risk assets finally materialised in February, as markets woke up to the threat of higher inflation. In the US, Treasury bond yields rose to a 4-year high and equity prices fell from near record levels. The S&P 500 declined -8.5% in 5 trading days, whilst the VIX, Wall Street’s so-called “fear index”, rose to a 2.5 year high.
Global equities were quick to recover, but remained in negative territory overall with the S&P 500 closing -4% lower. The publication of January’s Fed policy meeting minutes and new chairman, Jay Powell’s, bullish assessment of the US economy underlined the strong economic fundamentals underpinning the 9-year bull market. We see no signs of this abating and maintain our cautious preference for equities.
Mounting speculation that rates could rise further and faster than anticipated saw Fed fund futures price in an additional rate hike this year, bringing the total number to 4. Accordingly, the 10-year US treasury yield ended the month 15bp higher at 2.87%, down from an intra-month peak of 2.96%.
Higher rate expectations lifted the US dollar from its 3-year low set in mid-February from which the US dollar currency index rose 2.34%. The improved growth prospects outside of the US, notably in Europe, have been undermining the “Greenback” over the last year. However, disappointing Eurozone PMI’s and recent commentary from the ECB contributed to euro weakness, which fell -1.83% versus the US dollar. Sterling, which rallied at the start of the year on Brexit optimism and an increasingly hawkish stance from the BOE, closed lower following negative comments from EU chief negotiator Michel Barnier, at $1.38 and €1.13.
We de-risked the portfolios in mid-October, in anticipation of a market correction. This proved timely and the portfolios have performed well as a result. Following the recent sell-off, we took the opportunity to make additional changes, specifically increasing our exposure to Smart Beta trading strategies and reducing our exposure to global high yield bonds and emerging market hard currency debt.
ACUMEN Bond Portfolio
The ACUMEN Bond Portfolio (GBP) returned -0.63% in February. The Market Composite Benchmark and the IA Global Bond sector returned -0.34% and 0.46% respectively.
ACUMEN Conservative Portfolio
The ACUMEN Conservative Portfolio (GBP) returned -1.42% in February. The Market Composite Benchmark and the IA Mixed Investment 20-60% Shares sector returned -1.74% and -1.38% respectively. The portfolio has a rolling 1-year return of 1.45%.
ACUMEN Income Portfolio
The ACUMEN Income Portfolio (GBP) returned -1.56% in February. The Market Composite Benchmark and the IA Mixed Investment 20-60% Shares sector returned -2.26% and -1.38% respectively. The portfolio has a rolling 1-year return of 2.04%.
ACUMEN Progressive Portfolio
The ACUMEN Progressive Portfolio (GBP) returned -2.80% in February. The Market Composite Benchmark and the IA Mixed Investment 40-85% Shares sector returned -2.79% and -1.59% respectively. The portfolio has a rolling 1-year return of 6.13%.
ACUMEN Adventurous Portfolio
The ACUMEN Adventurous Portfolio (GBP) returned -2.87% in February. The Market Composite Benchmark and the IA Flexible Investment sector returned -3.49% and -1.52% respectively. The portfolio has a rolling 1-year return of 6.23%.
ACUMEN Equity Portfolio
The ACUMEN Equity Portfolio (GBP) returned 2.97% in February. The Market Composite Benchmark and the IA Global sector returned -3.84% and -1.28% respectively.
ACUMEN Strategic Portfolio
The ACUMEN Strategic Portfolio (GBP) returned -3.02% in February. The Market Composite Benchmark and the IA Specialist sector returned -3.84% and -1.00% respectively.
The value of an investment in the Protection Portfolios, ACUMEN Portfolios or Tavistock PROFILES may fall as well as rise. Past performance should not be seen as an indication of future performance. Source of data: Tavistock Asset Management Limited, Thomson Reuters and Lipper for Investment Management unless otherwise stated.