Please find below our weekly Investment Snapshot for the week ending 30th March 2018.
A brief insight into the latest market dynamics and details of any changes occurring within our model portfolios.
US stocks sold off late on Tuesday and US Treasuries rallied as the equity rebound that started last week reversed, as Technology shares tumbled. Investors are concerned by the revelations from Facebook about their unethical dealings regarding their users’ data. The concerns are over predictions of heightened regulation of the big tech firms that have essentially powered the equity bull run. The sell-off has led to shares in the ‘Faang+’ index, which tracks the performance of 10 major technology companies, including Facebook, Amazon, Apple, Netflix and Google, to suffer its worst one-day loss since the index began in September 2014, falling 5.6% on the day. This helped to drag the tech-heavy Nasdaq Composite to a near 3% decline and the S&P 500 down 1.7%. The declines marked a reversal from Monday’s rebound after major US benchmarks had their worst week in more than two years.
The decline spread to Asia and then Europe on Wednesday – Japan’s Topix index was down 1.7% by midday as the technology sector slid by over 2% in both Japan & Europe. The impact that this sell-off has had, has shown the amount of influence tech stocks have had on the markets and on global growth.
In regard to the possible impending trade war between the US and China, anxieties seem to have eased over the last week, but the threat protectionism poses to the global economy remains a concern. Instead, focus on tech stocks are likely to continue as trading becomes subdued over the forthcoming Easter weekend, but Thursday marks the final trading day of the quarter which might prompt fund managers to trim or add to their portfolios, in line with the current market conditions.
Gary’s market comments in conjunction with our investment partners
The Jupiter India fund has underperformed its index, MSCI India, since it was introduced into the MPS. Vestra do, however, still have strong conviction in both the fund manager and the implementation of strategy. This underperformance can be explained by the relative underperformance of both small-cap and mid-cap equities. The Jupiter India fund has a greater exposure to small-cap (20%) and mid-cap (27%) whereas the MSCI India index has a 99% weight in large-cap equities. This market-cap exposure in Jupiter India makes the fund unique and highly attractive for the long-term convictions of the investment committee. With favourable demographics, an appropriate policy mix and plenty of potential to raise productivity, India could maintain high single-digit real GDP growth over the coming decade.
The formal quarterly tactical asset allocation process is now nearing its end as the 7IM investment team decide how best to implement the conclusions on the outlook for the global economy and financial markets. The team believe that growth continues to remain solid given the US tax boost is adding to already strong growth, recovery is stretching to the weakest part of the Eurozone and Japan and China remain stable. The team will have to look at how to protect the portfolios if volatility increases, as fixed income instruments do not offer the same protection as they have in the past.
Sources: LGT Vestra and 7IM