Global Matters - Weekly

Richard Parfect -  15 August 2022

Back in February I gave a sob story of my childhood of how the 1970s and early 80s saw “austerity” hit my household, including my father’s industrial clothing factory closing down. Recent developments on the Continent, brings another childhood memory to mind; cold housing. Admittedly, the central heating system, decades past its use by date and an insufficiently insulated house, was not conducive to staying warm. However, an article caught my eye in the Financial Times* this week that showed the average temperature in British homes has risen considerably since the 1970s; even those that actually had central heating in 1971 saw average temperatures rise from circa 14C to 18C today.

Robert White, CFA -  8 August 2022

Japan has been in the headlines for the sad and shocking death of Shinzo Abe, one of the few truly visionary democratic leaders in modern times. The former Prime Minister was instrumental in transforming Japan’s economic and military ambitions, and while both remain a work in progress, he became a revered figure on the international stage. As investors, we are optimistic about the opportunity in Japanese equities; not only are they cheap, but nascent structural reforms and robust corporate profitability should provide a healthy tailwind over the coming years.

Richard Stutley, CFA -  1 August 2022

I met with one of our underlying global listed property managers last week and I thought some of the discussion points were worth repeating here. Until such time that we all live in the metaverse, what is happening with physical space remains important, with implications for investors beyond dedicated property buyers. 

From a sector perspective, we discussed the supply outlook for industrial/logistics space, following Amazon’s announcement earlier this year that they plan to mothball several new warehouse projects and sublet excess space.

Stephen Nguyen, CFA -  25 July 2022

What a difference a few months make. After a relatively calm year in 2021, we have witnessed several asset classes posting significant losses in the first half of 2022, including equities, credit, and sovereign bonds. We have seen an increase in volatility, and traditional diversifiers like government bonds have failed to provide protection as their correlation with risky assets has risen. The increase in correlation between bonds and equities has caused major headaches for the traditional multi-asset investors. It is worth remembering that asset prices habitually swing from week to week and at times, even intraday.

Lorenzo La Posta, CFA -  18 July 2022

I am a Millennial, born in the early 90s, which makes me probably one of the last generations to have experienced life before digitalisation took over. Maybe I was too young to be afraid of the millennium bug, but as a kid, using the internet meant monopolising my home’s landline. Digital technologies, once a premium item for few, are today embedded in all aspects of our lives and have brought significant changes and improvements to the way we live and operate.

Alex Harvey, CFA -  11 July 2022

In this week’s blog Alex Harvey stamps his thoughts on Inflation, and how over the course of the last year we have increased our exposure to real assets – those which have an intrinsic value, such as real estate and infrastructure – much of which generates an income that is directly or closely linked to inflation.

Matt Connor - 4 July 2022

In this week’s Global Matters Weekly we focus on ‘BNPL’ stocks; high dividend-yielding companies within our UK Equity portfolio that you can Buy Now, (and be) Paid Lots.

Jackson Franks - 27 June 2022

Having a Swedish partner meant that this weekend was spent eating a whole load of pickled herring and drinking unsweetened flavoured schnapps.

Mark Wright, CFA - 20 June 2022

Just over a month ago the United Kingdom (UK) reversed years of embarrassment to finish second place in the Eurovision Song Contest. Sam Ryder’s ‘Space Man’ impressed but was pipped to the post by Ukraine’s entry, ‘Stefania’ by Kalush Orchestra.

Tom Delic - 13 June 2022

An investor in Emerging Market (EM) equities over the last 12 years has had a torrid time. The asset class has not only suffered poor returns in both absolute terms since 2010, but also relative to Developed Market (DM) equities, with the latter being driven by the strength of the US equity market.

Robert White, CFA - 6 June 2022

While we generally do our best to avoid home bias here at Momentum, I propose to break that rule today in recognition of last week’s Platinum Jubilee celebrations. Whatever your views on the monarchy, no one can deny that to serve one’s country as Head of State for 70 years is truly an impressive feat. Since her ascension to the throne on February 6^th 1952, Queen Elizabeth II has lived through seven recessions, met 13 US Presidents and outlasted 14 UK Prime Ministers.

Gary Moglione - 30 May 2022

One of my favourite TV shows is Stranger Things and this week marks the release of the much anticipated fourth season. For those who are unfamiliar with the show, it follows the adventures of a group of young friends as they battle with various creatures that enter our world through a portal into an alternate dimension, which they call the “upside down”. Looking at markets right now feels like we may have slipped into some sort of alternative dimension...

Richard Parfect - 25 May 2022

In our industry there is often a level of expectation placed upon fund managers to fully understand everything that is going on and, worse still, to have Sage like skills in predicting the future. This pressure is heightened should the unfortunate individual concerned be in the public eye or rolled out in front of the media to give comment on events. Of course, the investment industry is not alone in this.

Andrew Hardy, CFA - 16 May 2022

With the skies and borders mostly open for international travel again, I’ve been visiting our parent company’s home market of South Africa this past week, a welcome opportunity to catch up with colleagues and clients in person. The hot topic has been investing overseas, following the local central bank’s recent relaxation of offshore investment limits; now investors can take up to 45% overseas.

Robert White, CFA - 09 May 2022

After the first 50bps interest rate rise by the Fed in over 20 years (with more to come) and the announcement of quantitative tightening starting in June, there is no doubt that the Fed is getting serious about containing inflation. Inflation data in April continued the pattern of the past year, generally exceeding expectations, with price rises becoming more broadly based and accelerating to multi-decade highs in the US and Europe.

Stephen Nguyen, CFA - 25 April 2022

As an avid sports fan, I have always enjoyed being involved in all things sports related. Having participated in various team-based and individual sports throughout my life, I of course enjoy watching a variety of different sports, be it golf, tennis, or football. Sporting events often bring people together and teach us the importance of values and hard work. If we look at successful sports teams or individuals, there are lots of similarities that can be drawn between them and professional investors.

This is not the first time I have written about Chinese equities and loyal readers will remember last August, when the media were calling it an “uninvestable” market, we were finding pockets of value and interesting opportunities. This year, a new wind is blowing under the Red Dragon’s wings.

Alex Harvey, CFA - 04 April 2022

Covid travel restrictions have now finally been lifted for passengers arriving in the UK. I’ve been fortunate to travel abroad in recent months including a trip to Jordan, with its rich cultural heritage spanning ancient civilisations and sites sacred to Christianity, Judaism and Islam. One regional constant over the millennia has been the Dead Sea; the world’s deepest hypersaline lake.

Matt Connor - 28 March 2022

The first race of the 2022 Formula One season didn’t disappoint, as Sir Lewis Hamilton sought a strong start to his record-breaking 8th World Championship in Bahrain. Many were quick to write off the Mercedes man, due to a lack of pace in free practice and qualifying compared to rivals Ferrari and Red Bull. Despite the negative outlook, Hamilton still managed to achieve a podium. As value investors we often view negative sentiment around a company as a potential opportunity to capitalise on irrational valuations.

Jackson Franks - 21 March 2022

The largest ever land acquisition took place towards the end of last year; it’s value: US$2,400,000. You may be thinking I’m missing a few zeros here, but what I haven’t yet mentioned is that this transaction does not relate to the real world but instead refers to Tokens.com’s purchase within the metaverse.

Mark Wright - 14 March 2022

It took less than a week for investors in Russian equities to see their holdings effectively become worthless. The Russian stock exchange has been closed for trading since Monday 28^th February, which meant depositary receipts listed on stock exchanges in London and elsewhere felt the full brunt of anyone wishing to head for the exit.

Michael Clough - 07 March 2022

The last two years have seen a huge increase in demand for sustainable funds, or those explicitly integrating environmental, social and governance (ESG) factors into their processes and portfolios. Naturally, fund companies cottoned on and there has been a proliferation of strategies available for investors to buy. Greenwashing, when marketing material and disclosures overstate the true level of ESG integration within a strategy, was an inevitable consequence of this trend.

Tom Delic - 28 February 2022

Men’s heavyweight boxing is perhaps set for its biggest year this century. Two upcoming bouts could lead to the winners meeting later in the year in a bid to become the undisputed champion of the heavyweight division. When assessing the potential entertainment value for spectators, an often-used phrase is “styles make fights”, meaning the blend of the two fighters’ boxing styles will ultimately determine how exciting a fight is. This is not too dissimilar to investment styles, where some work better together than others.

Gary Moglione - 14 February 2022

There have been a number of academic papers that have examined the performance of funds managed by smaller “boutique” investment houses versus the much larger “asset gatherers”. The outcome of these various studies is overwhelming; that boutiques tend to be the better performers with a consistent performance premium across various asset classes.

Robert White - 21 February 2022

The latest elevated CPI print of 7.5% has spooked investors this year, triggering volatility in both bond and equity markets. In trying times, it sometimes helps to take the long view. In a recent paper the Bank of England has taken this advice to the extreme, looking back 800 years to the 14^th century to calculate the average global GDP-weighted inflation rate of just 1.51%¹. Unfortunately, 800 years is not a particularly sensible investment horizon for most people, but there are plenty of other more relevant periods for us to examine when considering the importance of current economic events.

Richard Parfect - 07 February 2022

My mother used to say to me “a stitch in time saves nine”, as a child who grew up in the war and rationing, she was the product of her formative years. In the 1970s and 80s I would see her darning my father’s socks in the evening, something I doubt many households do today as the price of clothing and the expectation of durability has waned in the decades since. My father ran an industrial clothing firm, John Peck Ltd, on Edge Lane in Liverpool; it had hundreds of employees and was renowned as a high-quality supplier to a wide range of customers throughout the public and private sectors, they even held a Royal Warrant as a supplier to the Royal Households.

Andrew Hardy, CFA - 31 January 2022

2022 has started with a bang! Barring a recovery today January will close out as being the weakest start to a year for global equities – down 7.0% in US dollar terms – since 2009, when markets were still spiralling through the financial crisis. While that’s enough to warrant attention, some of the underlying trends in markets have been considerably more abrupt. Nonetheless, rather than being cause for panic, we believe this is a healthy correction, led by parts of markets where the most excess had built up, and that the conditions for further medium-term progress in equity markets remain in place.

Lorenzo La Posta, CFA - 24 January 2022

Our regular readers would have read the word “diversification” countless times across our pieces, especially about it being “the only free lunch in finance”. Now, everyone loves a free meal but certainly you’re not going to eat it only because it’s free, am I right? It needs also to look, smell and taste good, and the various courses need to be well balanced. We have recently added a new course to our menu, with a certain eastern flavour, that should make that free meal a lot more palatable for our clients: Chinese government bonds.

Richard Stutley, CFA - 17 January 2022

Last year, US Treasuries suffered one of their worst years this century. Treasury Inflation-Protected Securities (TIPS), on the other hand, returned +6%, making 2021 a pretty good year for these bonds versus their long-term average. So how did investors like us make money in TIPS; was it purely down to QE-fuelled irrational behaviour; and what do we expect from here?

Stephen Nguyen, CFA - 10 January 2022

Happy New Year to all our readers. As we enter the third year of the COVID-19 pandemic, uncertainty remains elevated in financial markets, largely centered on further Covid variants and the prospect of tighter monetary policy. Markets have largely brushed off these concerns of late and have come a long way since the lows of 2020. A quick reflection on the performance of different asset classes in 2021 highlights another strong year for risk assets, in contrast to bonds which were generally more challenged in the face of surging inflation.

Once again we mark the end of the year by sharing a compendium of 2021’s articles. Across dozens of blogs, which incorporate a mix of investment insight with topical twists, this charts our journey through what has been another most extraordinary year.

Our team has also grown this year, following the acquisition and integration of Seneca Investment Managers, injecting fresh thinking and invaluable insights to the Global Matters articles.