Best Ideas Portfolios: May roundup

The 'silly season' is the period over the summer where families are on holiday, business quietens down and parliament is in recess.

FacebooktwitterlinkedinmailFacebooktwitterlinkedinmail   by Kasim Zafar, 20th June 2019

So with an absence of newsworthy items, fable has it, attention grabbing headlines would be printed in order to maintain newspaper sales. These days, journalists are active across several different media but conceptually, the silly season remains.

Investment professionals enjoy summer holidays like most people. So with punchier headlines and fewer wise old hands around to calm nerves, markets tend to be more erratic during these months. And so goes the adage in financial circles to “sell in May and go away”! President Trump has been upsetting quite a few people during his tenure at the White House and that old adage is another victim, for this year one would have been wise to sell in April.

The month of May saw equity markets down anywhere from 5% to 10%, driven down by worries that the US and China look less likely to reach an agreement on their trade dispute. It was only a few weeks ago in April that Trump had exclaimed “something very monumental could be announced”, this now looks increasingly unlikely. Consequently, riskier investments like equities and especially those tied in any way to China, sold off heavily. Meanwhile, assets such as government bonds rallied as investors sought safe havens.

We maintain that the dispute between the US and China has more to do with each ones’ ambition for technological supremacy than with their trade in goods. So we have improved the defensive profile of your portfolios by shifting into quality companies, reducing the riskier bond holdings and focusing more on government bonds.

The bond market thinks global growth will slow dramatically and central banks will have to cut interest rates. The equity market still maintains some hope that a deal can be done or that central banks will step in to save the day. We think reality lies somewhere in between. The meeting between Presidents Trump and Xi at the G20 meeting at the end of June will be a critical point for markets.

There is more information in our blogs and the Strategy Insight section of our website. You can link directly to our current favourites opposite. Portfolio factsheets to 30/05/2019 are now available through this link.

As always, please do get in touch with any questions or feedback!

About the author: Kasim Zafar

Kasim graduated with a BSc (Hons) in Physics from Imperial College and is a CFA charter holder, being a regular member of the CFA Institute and CFA UK. He began his career in investments in 2002, gaining experience as a portfolio manager and senior analyst of global capital markets. His experience spans multiple asset classes, constructing portfolios with varying risk/return objectives and active risk management processes.

Kasim is the portfolio manager for the EQ Investors Best Ideas and Absolute Return portfolios. He is an active member of the investment management, strategic asset allocation and fund selection committees.

When not immersed at work, Kasim often finds himself stumped and constantly amazed by his young daughter at home. He also enjoys spending time in the kitchen practising his “cheffy” skills with both European and Asian cuisine, reflecting his mixed background.

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