February 2016

Manager Commentary

Investor sentiment continues to oscillate with the extreme intra-month movements in global equity markets. The slowdown in China and decline in the price of oil are the primary reasons, but the rising fears of a “Brexit” have also begun to undermine confidence in sterling. Volatility in financial markets remains high and continues to be fuelled by the increasing threat of deflation in the developed world. The FTSE 100 climbed 0.22% in February, but at one stage during the month it had lost more than -8.75%. The MSCI World closed down -0.96% and the S&P 500 fell -0.41%. The Nikkei 225 tumbled -8.51% following the steep trend reversal in the Japanese currency amidst the growing reality of the failure of “Abenomics”. The yen rose 6.92% versus the US dollar to close at the highest level in more than one year. Sterling remains under downward pressure in the run up to the EU Referendum and fell -2.32% against the US dollar to finish at 1.39. Commodity markets remain unsettled and the GSCI declined -1.41%. Natural gas plunged -25.54%, but the price of oil is showing signs of stabilisation and rose 0.39% to settle at $33.75 per barrel. Gold posted its best monthly performance since January 2012 and rallied 10.75% to $1,237 per troy ounce. Government bond prices increased in the US, Europe and Japan; taking the Universe of government securities at negative yields to a record $5.5 trillion. This flight to safety trade further distorts the meagre returns from fixed income investments and could have long term negative repercussions for investors when the central bank quantitative easing programmes are finally unwound.