Global Matters - Weekly

Richard Stutley- 29 November 2021

It is hard to know what is going to happen. While people like to hear a single view about the outlook for the global economy, with plenty of point forecasts for key variables like growth and inflation, the future is in fact best expressed as a range of possible outcomes; see my colleague Lorenzo La Posta’s blog from two week’s ago (“Embracing Uncertainty”) for a good explanation of what this looks like in practice.

Richard Parfect - 22 November 2021

Spotting dangers and threats can be a difficult skill; not least because they often hide in plain sight. The physical act of literally seeing a danger can require a deliberate act of searching it out.

Lorenzo La Posta - 15 November 2021

Today, uncertainty takes many forms. It revolves around inflation, supply chains, energy prices, interest rates, wages, growth and more. Is the current bout of inflation more than transitory, or will inflation indicators turn down towards the widely used 2% target any time soon?

Jackson Franks - 08 November 2021

It appears that each time it’s my turn to write the blog we are at the start or in the midst of a major sporting event. This time round it’s the autumn rugby internationals. As an avid sports fan, the autumn internationals bring great excitement, however, one matter that can’t be ignored is the amount of travel the eight Southern Hemisphere nations will embark on and therefore the environmental impact. 

Mark Wright - 01 November 2021

A commonly accepted definition for market efficiency is “the degree to which market prices reflect all available, relevant information”. Given the speed with which news is now disseminated around the world, along with the rapid growth in algorithmic trading, one might expect markets to be reasonably efficient.

Michael Clough, CFA - 25 October 2021

I recently went to see the latest James Bond film to watch Daniel Craig’s last appearance as the British superspy. It was Craig’s fifth outing since his introduction in 2006 and the latest release marked a rather explosive end of an era in the latest storyline of 007. In our slightly less glamorous world of investment management, might we be facing an end of an era moment too? Since 2010 inflation in G10 countries has averaged 1.5%, below the typical 2% central bank target.

Tom Delic - 18 October 2021

The ability to explain a concept or subject to someone else is a challenge.  It requires you to both understand the topic you have been asked to discuss, but also communicate it in a way that is understandable to the listener or reader.  Listening and reading are two of the most important activities in our industry.  After all, we have two eyes and two ears, but only one mouth. 

Robert White, CFA - 11 October 2021

When it comes to risk management, a little bit of paranoia is probably a good thing. This applies when managing your finances, but history tells us that it is even more critical in the field of aerospace engineering. On the morning of 28 January 1986, the crew of the Space Shuttle Challenger tragically fell victim to one such failure as their spacecraft disintegrated a mere 73 seconds after launch. The cause of the accident was a seemingly insignificant faulty part, namely the rubber O-ring which sealed together field joints used to connect sections of the rocket boosters. These O-rings were a mere 7.1 millimetres in diameter, yet the malfunction had the gravest of consequences.

Gary Moglione - 04 October 2021

This week, an innocuous announcement from BP about temporarily closing a handful of its petrol stations due to a driver shortage caused panic buying and fuel shortages across the UK. In March, I wrote a blog called “Why we are all hard wired to be bad investors”. This week’s events are a good example of some of the behavioural inefficiencies highlighted.

Stephen Nguyen, CFA - 27 September 2021

There are many ways investors try outperforming the market. Tilting the portfolio regionally, moving up and down the market capitalisation spectrum or exposing their portfolio to different investment factors (risk premia). Some factors are well known and easily defined whilst others are less so. In recent times, much has been discussed about the “great rotation” from growth to value. Growth and value companies are widely understood, however there is another factor, namely quality, that has been on the sidelines recently and is less clearly defined.

Richard Parfect - 20 September 2021

When the human mind is confronted with a completely unexpected situation or an event that has not been experienced before, then the brain immediately suffers what is known as a “startle effect”. This was commented on by Sully Sullenberger; the captain of US Airways Flight 1549 that successfully ditched in the Hudson River in 2009 without the loss of a single life.

Andrew Hardy, CFA - 13 September 2021

Tomorrow sees the start of our annual client conference, Think-Tank, which runs for three mornings from Tuesday 14th to Thursday 16th September. From a virtual studio our team at Momentum will host 13 speakers presenting on a range of specialist, investment focused topics. It's an outstanding lineup of world class investors taking to the virtual stage to share their outlooks on topics ranging from the macro to the micro, from inflation, Chinese policy risks and disruptive technologies, through to opportunities in commercial property and music royalties.

Richard Stutley, CFA - 06 September 2021

Bonds remain expensive today, with yields across the ratings spectrum having tracked core rates lower. While core rates have lifted off their lows from last year (US 10 year yields got as low as 0.5% in August 20201), they remain unattractive at current levels. However, there remain areas of relative value within short duration high yield and dollar-denominated emerging market debt, as well as floating rate credit.

Lorenzo La Posta - 23 August 2021

When you invest with so many high-quality fund managers, it’s only natural to pick their brains every now and then. We have spoken to a few of them and collected their thoughts on the current situation in China.  As a background, around nine months ago, in November 2020, Ant Financial (Alibaba’s fintech business) was ready to break records with a $37 billion IPO and an estimated valuation close to $300 billion. However, the Chinese regulators pulled the plug on it. Since then, the clampdown has extended more broadly, reaching the wider internet and e-commerce sector, property developers, the ride-sharing company Didi Chuxing and the entire private education sector.

Alex Harvey, CFA - 16 August 2021

You will likely be aware that last month Amazon founder, Jeff Bezos, was blasted to the edge of space aboard New Shepard, a rocket designed to give fare paying customers an out of this world – and out of their seats – experience. His flight came just days after that of fellow billionaire businessman Sir Richard Branson whose company Virgin Galactic is also opening up a commercial venture. Surely Elon Musk can’t also resist the ultimate ride? 

Mark Wright - 09 August 2021

In her 19^th century novel, ‘Molly Bawn’, Irish novelist, Margaret Wolfe Hungerford, is credited with paraphrasing a statement made about beauty by Athenian philosopher and founder of the first institution of higher learning in the Western world, Plato.

Jackson Franks - 02 August 2021

It’s been a summer of competition here in the UK (and globally). Firstly, we welcomed back Wimbledon, then had the excitement of the football not quite coming home, followed by one of golf’s majors and now the Olympics. Not to mention the bonus of a British and Irish Lions tour in South Africa, where a game of two halves gave the Lions victory in the first test. By the time this blog is released we will know the result of the second test so I will choose my words carefully by not trying to pre-empt a result.

Michael Clough - 26 July 2021

“Should you be over or underweight the US equity market?” is surely one of the most asked asset allocation questions of the past 5-10 years. Over the 10 years to June end in US dollar terms, the US equity market outperformed the UK, Europe and Japan markets by 255%, 202% and 194%, respectively. There are good reasons for this outperformance. Most recently of course, the technology giants that dominate the US equity index were the chief beneficiaries from lockdowns as we all became dependent on, and some maybe addicted to, their services. However, it really has been a trend since the financial crisis that US companies have delivered sustained stronger earnings growth and better profitability than their developed market peers.

Tom Delic - 19 July 2021

Having been in consistent print since its first publication in 1949, Benjamin Graham’s ‘Intelligent Investor’ has, along with ‘Security Analysis’, provided the philosophical foundation to thousands of successful investment practitioners over the decades.  However, as Mark Twain said, “A classic is something that everybody wants to have read, and nobody wants to read”. 

Gary Moglione - 05 July 2021

“Past performance is not indicative of future results” is a regulatory risk warning on most investment oriented material that everyone knows but not many people seem to actually implement into their decision making. A Fund Managers performance can dictate whether they become a hero or villain in the eyes of the public and the press. This then influences investment flows and ultimately determines whether the fund thrives or is liquidated

As a casual football fan and long-suffering supporter of the English national team, there was only ever one topic I could write about today. No, not the merits of the latest ECB strategy review (perhaps one for another time) but instead last night’s dramatic European Championship Final between Italy and England. Given this was the first time the England men’s team has reached a final for 55 years, it’s been a pretty memorable tournament, despite them falling short at the final hurdle. Since their last footballing success, we’ve seen nine US bear markets, ten UK Prime Ministers and both multi-century highs and lows for US 10 year government bond yields.

Alex Harvey, CFA - 17 May 2021

Genghis Khan is considered by many to be perhaps the greatest conqueror of all time (sorry, Guillaume de Normandie), and ruled over an empire that at its peak spanned as far west as modern-day Poland and as far east as the Russian Pacific seaboard. Mongolia today is a ‘fraction’ of that size but still in the world’s top 20 largest countries and would knock Kazakhstan down into 10th place if you included the Mongolic autonomous region of the People’s Republic of China. As the least densely populated country in the world it fits the population of Wales into a land mass the size of Western Europe. It’s that empty.

by Stephen Nguyen, CFA - 28 June 2021

Patience is essential to daily life and even more so if you are parents to young kids. When I was a child, I was often told to “be patient”, which meant staying calm in the face of delay, frustration or adversity. We all have many opportunities in life to practice this virtue; being stuck in traffic, the ups and down of parenthood, or indeed, managing one’s investments. 

Richard Parfect - 21 June 2021

What is it worth then? This is a question investors should be asking themselves all the time. However, the true answer is not always obvious. There are many ways to approach it and there is of course an easy “short cut” to establishing an answer; the stock market price. However, relying on such a public pricing mechanism implies a high level of faith on efficient markets and to believe there is no such thing as “the madness of crowds”.

Andrew Hardy, CFA - 14 June 2021

“As violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” Ronald Reagan’s caricature of inflation in 1978 reflects a degree of fear at the time about this pernicious thief that is largely absent amongst today’s policymakers.  After several decades of low inflation, policymakers and investors have potentially become too complacent about the risks of higher inflation

Richard Stutley, CFA - 07 June 2021

When I raise the issue of the importance of macro, I tend to get the same responses, which fall into two categories: 1. It can’t be done; no one has a good record predicting macroeconomic variables like GDP growth. 2. Why bother? Even if you had perfect foresight of what these variables were going to be, you wouldn’t be able to predict the market’s reaction.

Lorenzo La Posta, CFA - 24 May 2021

I think we, as human species, have proved how advanced and smart we are in many ways: we have sent people into space, observed the smallest atoms, cured diseases and invented pizza. Yet, many people still fall foul of one of the most extreme idiocies: sexism. There is no justifiable or objective reason behind the discrimination based on the absence (or presence) of the Y chromosome, so, in a world of cognitive human beings, such a thing should not exist at all.

Mark Wright - 10 May 2021

The Renaissance marked the transition from Middle Ages to modernity in 15^th and 16^th century Europe. A fairly significant event! We now appear to be witnessing another renaissance – a Value Renaissance. Whilst probably not as significant in the history of world civilisation, similarities do exist in the origin of the two.

Jackson Franks - 26 April 2021

As an avid Watford football club supporter, the announcement of a newly formed European Super League (ESL) on the 18^th April felt like a break-up. The dream of one day getting to see my club play at the highest level had disappeared overnight. For those who didn’t see the news, twelve of the “biggest” European football teams broke away to form the ESL, of which six were English.

Michael Clough - 19 April 2021

Two weekends ago Hideki Matsuyama became Japan’s first male winner of one of golf’s four major championships by claiming the Masters at the prestigious Augusta National Golf Club. Only three of the world’s top 100 ranked male golfers are from Japan. The country is underrepresented in the upper echelons of the golfing world and it is often underrepresented in investors’ portfolios too.

Christopher Butcher - 12 April 2021

During a period of extreme volatility and a global pandemic, the initial public offering (IPO) market had a spectacular year in 2020 in terms of the number of new listings and proceeds raised, along with the rise in popularity for Special Purpose Acquisition Companies (SPACs) which have become one of the hottest investment trends on Wall Street.

Tom Delic - 29 March 2021

The CEO of a business has many responsibilities, two of the most important being the strategic and operational oversight of the company.  Another vitally important aspect of their role is capital allocation, an area that is often underappreciated by an investor but also poorly carried out by many CEOs.  When researching a fund, it is often useful to view the fund manager as a CEO.

Robert White, CFA - 22 March 2021

For all the column inches dedicated to central bank meetings this month, one potentially seismic change to monetary policy has slipped under the radar over the last few weeks. In the most recent UK budget, chancellor Rishi Sunak announced that the Bank of England should reflect the “importance of environmental sustainability”in policy decisions, which includes asset purchases. 

Gary Moglione - 15 March 2021

Investing our savings is an extremely important part of life that will have a strong influence on retirement, home ownership and the quality of our lifestyle. Therefore, you would expect us to have evolved to be efficient investors. Unfortunately, we are hard wired to be bad investors as many of our natural instincts force us to fall into a number of behavioural traps that result in poor investment returns.

Alex Harvey, CFA - 08 March 2021

A little over a fortnight ago history was repeated when NASA’s Jet Propulsion Laboratory (JPL) successfully landed a rover on the Martian surface.  After a near seven-month journey across 300 million miles of space, at a gentle cruising speed of nearly 25,000mph, the rover touched down on 18^th February.  Perseverance – or Percy for short – was lowered on to the surface by a sky crane, like its cousin Curiosity in 2012, in a feat of incredible human engineering.  Of the now five successful JPL rover landings (yes, five!), this was the most accurate ever and was enabled through the experience gleaned over previous rover missions. 

Richard Parfect - 01 March 2021

As I write this there is a good news story of a B777 executing a successful diversion and emergency landing following the dramatic loss of one of its two engines. Somewhat unnervingly for passengers the remnants of the burning engine were clear to see. More seriously there was fuselage damage too, however the pilots’ frequent rehearsed emergency procedures and risk controls prevented a catastrophic outcome.

Andrew Hardy, CFA - 22 February 2021

Digital gold or “index for money laundering¹”? Fiat currency hedge or irrational mania? Bitcoin divides opinion more than most, but the bulls are in the ascendency at present and the 12-year old cryptocurrency is gathering many new followers as a result. Its 6-fold increase in price in the last year has been the driver; creating a FOMO (fear of missing out) effect whilst also increasing the size of its market, which reached $1 trillion over the weekend, to a level where institutions begin to consider it more seriously. 

Richard Stutley, CFA - 15 February 2021

The tale of Goldilocks and the Three Bears was a popular analogy in markets in the years post the Great Financial Crisis, used to describe the global economy as not too hot, not too cold, but just right. Extending the idea to today’s central bank policy: too hot would be embarking on helicopter money or large scale debt forgiveness; too cold would be abandoning tools like quantitative easing, possibly in response to criticism of QE’s role in fuelling asset price bubbles; just right, then, is a continuation of current policy and hence central bankers need to hold their nerve in the face of rising inflation and provide more of the same.

Lorenzo La Posta, CFA - 08 February 2021

Tuesday 26^th January, it’s early morning here in the UK and still night in the US when Aurelio, a friend of mine, texts me.

Aurelio: “Dude, what is going on with Game Stop? Last week some people on Reddit said they were gonna shoot GME (ticker for Game Stop) to the moon, to $1000 per share! So, I bought a few at $45 on Friday…”

Stephen Nguyen, CFA - 01 February 2021

2020 witnessed some of the toughest challenges – be it social, economic or political – that most of us have ever experienced. Around this time 12 months ago, the Covid-19 pandemic was gathering momentum, particularly in Asia before it spread further afield, and soon enough the world went into lockdown. As we slowly emerge from the shadow of the pandemic thanks to vaccine breakthroughs, mobility and global economic growth should gradually increase.

Jackson Franks - 25 January 2021

For me writing has never been easy, in fact English was my least favourite subject at school.  However, I enjoy a challenge and as I think about what to write this week, I take myself back to my English class at school to remind myself of what writing tricks I was once taught. What I remember most is how we were taught the basics of writing a story: each story must consist of a beginning – hooking the reader & setting the scene, a middle – a series of interesting and exciting events, and an end – tie up loose ends & satisfy the reader.

Robert White, CFA - 18 January 2021

It is generally accepted that 2020 saw changes in the way we use technology that are likely to persist even after the pandemic ends. Many changes to society and markets already appear self-evident today, and developing a full understanding of the implications will be important for active managers over the years to come. The Christmas break provided us with a chance to ponder more introspectively over the impact these changes may have on the investment management industry itself, and how best to serve our clients over long term.

The Global Matters weekly readership has picked up greatly over the past five years and once again we mark the end of the year by sharing a compendium of 2020’s articles.  Across dozens of blogs, which incorporate a mix of investment insight with topical twists, this charts our journey through what has been the most extraordinary year. 

A Pack of Wolves by Lorenzo La Posta - 07 December 2020

Scotched Eggs by Alex Harvey, CFA - 14 December 2020 

Inflated expectations?, by Stephen Nguyen,CFA - 02 November 2020

Cheque List, by Michael Clough - 09 November 2020

Light at the end of the tunnel, by Christopher Butcher - 16 November 2020

Road to Recovery, by Andrew Hardy, CFA - 23 November 2020

A brief history of how to lose money, by Richard Stutley, CFA - 30 November 2020

The Perfect Storm, by Alex Harvey, CFA - 05 October 2020

Ipse dixit? No, thanks, by Lorenzo La Posta, CFA - 12 October 2020

Relationship Problems, by Robert White, CFA - 19 October 2020

ESG: Don't be a spectator, by Jackson Franks - 26 October 2020

Yellow metal, green lights, by Andrew Hardy, CFA - 07 September 2020

Realpolitik, by Richard Stutley - 14 Septemer 2020

Staying out of the Rough, by Michael Clough - 21 September 2020

The Long & Short of What's Next, By James Klempster, CFA - 28 September 2020

Spaghetti Western, by Lorenzo La Posta - 03 August 2020

Safe Hands in Troubled Times, Robert White, CFA - 10 August 2020

Fast Forward 10 years, Jackson Franks - 17 August 2020

The Road Map to Success, by Stephen Nguyen - 24 August 2020

Lessons from Japan, by Richard Stutley, CFA - 06 July 2020

Socially (Un) Acceptable, by Michael Clough - 13 July 2020

2020 - a rollercoaster ride, by James Klempster, CFA - 20 July 2020

How flow can you go?, by Alex Harvey, CFA - 27 July 2020

The SpaceX Factor, by Alex Harvey, CFA - 01 June 2020

Playing the odds, by Robert White, CFA - 08 June 2020

Looking Forward, by Jackson Franks, CFA - 15 June 2020

The Great Disconnect?, by Stephen Nguyen, CFA - 22 June 2020

TISATAAFL, by Andrew Hardy, CFA - 29 June 2020

Risks & Opportunities in Fixed Income, by Andrew Hardy, CFA - 04 May 2020

Size Matters, by James Klempster, CFA - 11 May 2020

Steering Clear of Losses, by Lorenzo La Posta - 18 May 2020

Somethings never change, by Michael Clough - 06 April 2020

Drop the top, by Richard Stutley, CFA - 20 April 2020

Covid-catalysed structural changes in global real estate, by David Lashbrook, CA (SA), CFA - 27 April 2020

Breathe, think, act, by Lorenzo La Posta - 02 March 2020

Tipping Point, by Alex Harvey, CFA - 09 March 2020

The Bear Necessities, by Robert White, CFA - 16 March 2020

(iI) Liquidity of Property, by Jackson Franks, CFA - 23 March 2020

China's Recovery, by Stephen Nguyen, CFA - 30 March 2020

Unknown unknows: the coronavirus, by Michael Clough - 3 Feb 2020

Opportunities to leapfrog in EM, by David Lashbrook, CFA - 10 Feb 2020

Who cares wins, by Andrew Hardy, CFA - 17 Feb 2020 

The dangers of DIY, by James Klempster, CFA - 24 Feb 2020