SEPTEMBER 2017 Performance
September could mark a potential turning point for global financial markets. Synchronised growth and resurgent inflation led to a dramatic shift in communicated central bank policy towards balance sheet reduction and an historic end to crisis-era quantitative easing.
On September 20th, the Fed took the landmark decision to start unwinding its $4.5 trillion balance sheet. Fed Chair, Janet Yellen, said the normalisation process would be very gradual, starting in October, and would trim just $10 billion per month (stepping up $10 billion per quarter to a total of $50 billion). The Fed also indicated a likely third rate hike this year, probably in December, as well as 3 increases in 2018. The announcement came on the back of communications from the European Central Bank, September 7th, and the Bank of England, September 14th, suggesting an October tapering in ECB asset purchases and likely UK rate rise in November.
Towards the end of the month, the White House announced its long awaited proposal for cutting US taxes. Looser fiscal policy, to offset tightening monetary policy, would provide welcome stimulus and was interpreted positively by markets sending global equities and bond yields higher.
In the UK, 10 year Gilt yields rose 33bps with US Treasury and German Bund equivalents climbing 20bps and 10bps respectively. Elevated yields contributed to Sterling strength, up 3.61% against the Dollar, 4.45% against the Euro and 5.99% against the Yen. The stronger pound led to a decline in the FTSE 100, down -0.78%, bucking an otherwise positive performance from equity markets which saw the MSCI World rise 2.08% and fresh highs for the S&P 500. In Commodity markets, WTI Oil rose 9.40% to $51.67 a barrel, on improving demand and a likely extension to OPEC supply cuts. Gold declined -3.22% to $1,279.10 per ounce.
The portfolios performed extremely well versus the IA Sector benchmarks over the past month given our tactical positioning across asset classes and strategy to hedge overseas currency exposure. However, we believe the transition to a more normal policy framework will prove tricky with increased volatility and unintended consequences likely over the coming months. We continue to manage risk on a daily basis and have positioned the portfolios accordingly.
ACUMEN Bond Portfolio
ACUMEN Bond Portfolio returned -0.59% in September. The Market Composite Benchmark and the IA’s Global Bond sector returned -0.54% and -2.81% respectively.
ACUMEN Conservative Portfolio
ACUMEN Conservative Portfolio returned -0.27% in September. The Market Composite Benchmark and the IA Mixed Investment 20-60% Shares sector returned 0.47% and -0.83% respectively. The profile has a rolling 1-year return of 3.10%.
ACUMEN Income Portfolio
ACUMEN Income Portfolio returned -0.10% in September. The Market Composite Benchmark and the IA Mixed Investment 20-60% Shares sector returned 0.72% and -0.83% respectively. The profile has a rolling 1-year return of 5.28%.
ACUMEN Progressive Portfolio
ACUMEN Progressive Portfolio returned 0.63% in September. The Market Composite Benchmark and the IA Mixed Investment 40-85% Shares sector returned 1.23% and -0.93% respectively. The profile has a rolling 1-year return of 9.03%.
ACUMEN Adventurous Portfolio
ACUMEN Adventurous Portfolio returned 0.74% in September. The Market Composite Benchmark and the IA Flexible Investment sector returned 1.48% and -1.10% respectively. The profile has a rolling 1-year return of 9.19%.
ACUMEN Equity Portfolio
ACUMEN Equity Portfolio returned 1.30% in September. The Market Composite Benchmark and the IA’s Global sector returned 1.99% and -1.46% respectively.
ACUMEN Strategic Portfolio
ACUMEN Strategic Portfolio returned 0.86% in September. The Market Composite Benchmark and the IA’s Global sector returned 1.99% and -2.19% 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.