January 2018 Performance
Global equity markets charged ever higher in January. The MSCI World rose 5.22% driven by the US, where the S&P 500 enjoyed its strongest start to a year since 1987. Meanwhile, emerging markets returned 8.33% led by Brazil and Hong Kong, where the Hang Seng rose 9.92%.
Brushing aside US Government shut down fears, weaker than expected Q4 GDP growth and new trade tariffs on solar panels and washing machines, investors focused on the positives. S&P 500 corporate earnings are expected to increase 13.7% in Q4. Trump’s tax cuts and the weak US Dollar have benefited US equities and synchronised global growth continues to underpin risk assets throughout the world.
In fixed income, the 10-year US Treasury yield broke through an all-important resistance level, marking a symbolic end to the multi-decade downward trend in government bond yields. The 10-year US Treasury yield rose 31bp to 2.72%, its highest level since April 2014. In Germany, the 5-year Bund yield turned positive for the first time since late 2015. However, credit spreads remain tight and emerging markets continue to do well, with the iShares Emerging Market Local Currency ETF up 4.41% in USD.
The US Dollar Index continued its downward trend, falling -3.25%, as Steve Mnuchin (US Treasury Secretary) endorsed a weaker US Dollar whilst speaking at the World Economic Forum in Davos. Dollar weakness, and growing confidence in Brexit and the UK economy (Q4 GDP +0.5%), sent Sterling higher, up 5.02% against the US Dollar.
In commodity markets, Gold rallied 3.24% to $1,344.70 and WTI Oil climbed 7.13% to $64.73 a barrel. The S&P Goldman Sachs Commodity Index rose 3.42%.
The portfolios performed well this month. Yet there are clear signs of creeping investor euphoria, which may indicate we are approaching the twilight stage of this ageing equity bull market. If inflation continues to rise, pushing bond yields higher, then we will likely see a 5-10% correction later in 2018 or in early 2019. Having de-risked the portfolios in mid-October, we are well placed to benefit from a pick-up in volatility. However, the underlying economic backdrop remains positive and as such we do not envisage the next correction as marking the beginning of a structural downturn.
ACUMEN Bond Portfolio
The ACUMEN Bond Portfolio (GBP) returned -0.69% in January. The Market Composite Benchmark and the IA Global Bond sector returned -0.78% and -1.77% respectively.
ACUMEN Conservative Portfolio
The ACUMEN Conservative Portfolio (GBP) returned 0.05% in January. The Market Composite Benchmark and the IA Mixed Investment 20-60% Shares sector returned 0.93% and -0.09% respectively. The portfolio has a rolling 1-year return of 4.67%.
ACUMEN Income Portfolio
The ACUMEN Income Portfolio (GBP) returned 0.25% in January. The Market Composite Benchmark and the IA Mixed Investment 20-60% Shares sector returned 1.57% and -0.09% respectively. The portfolio has a rolling 1-year return of 5.80%.
ACUMEN Progressive Portfolio
The ACUMEN Progressive Portfolio (GBP) returned 1.53% in January. The Market Composite Benchmark and the IA Mixed Investment 40-85% Shares sector returned 2.21% and 0.11% respectively. The portfolio has a rolling 1-year return of 11.94%.
ACUMEN Adventurous Portfolio
The ACUMEN Adventurous Portfolio (GBP) returned 1.34% in January. The Market Composite Benchmark and the IA Flexible Investment sector returned 3.07% and 0.58% respectively. The portfolio has a rolling 1-year return of 12.19%.
ACUMEN Equity Portfolio
The ACUMEN Equity Portfolio (GBP) returned 2.99% in January. The Market Composite Benchmark and the IA Global sector returned 3.51% and 0.54% respectively.
ACUMEN Strategic Portfolio
The ACUMEN Strategic Portfolio (GBP) returned 2.32% in January. The Market Composite Benchmark and the IA Specialist sector returned 3.51% and 0.65% 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.