More of the Same

by Richard Stutley, CFA

Quote: “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”

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.

Market Snapshot

• Global equities rose 1.7% last week
• The US Senate acquitted former President Trump of incitement to insurrection
• Brent crude rose 5.2% last week to $62.4 a barrel
• Gold rose 0.6% to $1824.23 per ounce

To the moon – YOLO

by Lorenzo La Posta, CFA

Tuesday 26th 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…”

I had not heard anything about Game Stop, so I start by checking the share price: it closed at $77 yesterday, +285% in the past two weeks! Ok, something’s off. I spend a few minutes on r\ wallstreetbets to get a grasp of what apparently is suddenly becoming a coordinated action in one of the largest online communities. I see people yelling stuff like “Let’s get GME to the moon!”, “We own you, hedge funds!”, “HOLD TILL $1000 – AT LEAST” and loads of “YOLO” (i.e. you only live once). Some people are even posting screenshots of their six digit $-gains made over just a few days. I can get back to Aurelio now. He’s no investment expert, yet he’s smart enough to understand what’s going on.

Market Snapshot

• Global equities rose +4.2% last week
• Concern mounts after limited trials show the Oxford/AstraZeneca vaccine doesn’t protect against mild/moderate illness from the South African mutation
• Brent crude oil rose +6.2% to $59.3 a barrel
• Gold fell -1.8% to $1847.1 per ounce

Emerging Opportunities

by Stephen Nguyen, CFA
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. Emerging markets (EM), led by the Asian powerhouses (primarily China, South Korea and Taiwan), are likely to lead the recovery helped both by them being the engine of global growth but also having managed the pandemic better than peers. Emerging markets outperformed global developed equities in 2020 for the first time in three years: could this be a sign of things to come?

Market Snapshot

• Global equities fell -3.4% last week
• The IMF revised their global growth forecast for 2021 from 5.2% to 5.5%
• Brent crude rose 0.8% last week to $55.9 a barrel
• Gold fell -0.4% to $1847.65 per ounce

StoreREIT telling: three key elements

by Jackson Franks
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. As I wrote these characteristics down it suddenly looked very familiar. This is what we expect of and how we critique real estate managers. We look for the successful implementation of a story which follows the same characteristics; a beginning – raising capital & deployment, a middle – asset management initiatives, and an end – disposing of the asset(s) & redeployment of capital.

Market Snapshot

• Global equities rose 1.5% last week
• Joe Biden was inaugurated as the 46th US President
• Brent crude rose 0.6% last week to $55.4 a barrel
• Gold rose 1.5% to $1855.61 per ounce

An industry in constant evolution

by Robert White, CFA
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. Much has been written on how society will change following the pandemic and there are several examples of interesting shifts in consumer trends. My favourite example – albeit admittedly very niche – has been the explosion of interest in the 1,500-year-old game of chess since the pandemic. Despite the success of The Queen’s Gambit on Netflix, who would have thought the game would become one of the fastest growing spectator sports on video streaming services such as Twitch.

Market Snapshot

• Global equities fell -1.4% last week
• President Trump became the first US President to be impeached for a second time
• Brent crude fell -1.6% ending the week at $55.1 a barrel
• Gold fell -1.1% to end the week at $1828.5 an ounce