Imperium Capital Publication

Viewpoint – November 2022

The rally in risk assets in October broadened out in November, with strong returns across nearly all major asset classes and markets. MSCI indices showed developed equity markets returned 7.0% in the month, taking the gain from the mid-October low to 15%, while the best returns came from emerging markets, up 14.8% in November, driven by an extraordinary rise in China of 30%.

Global Matters Weekly – 12 December 2022

What were you thinking?

by Tom Delic — Portfolio Manager

— A valuation discipline is designed to place the odds in your favour.

2022 has been an eventful year across financial markets, and while anything could happen during the last few weeks of December, I thought it would be worth reflecting on the extraordinary market behaviour we have seen over the past few years.

It feels as though there are numerous examples from the final throws of this cycle that could be placed under the microscope of the financial historian, decades from now. Could it be Austria’s 100-year bond that yielded 0.375% in December 2020, down over 60% since? Or perhaps US CCC rated corporate debt yielding 7.5% in the summer of 2021, a credit rating that has a long-term average annual default rate of 25%?

Market Snapshot

    • Global equities fell 2.5% on the week
    • Four European Parliament officials, including vicepresident Eva Kaili, were charged with corruption offences as part of an investigation into claims that Qatar attempted to buy influence in a key upcoming vote
    • Brent crude fell 11.1% on the week to $76.1 a barrel
    • Gold remained flat on the week at $1797.3 an ounce

Global Matters Weekly – 5 December 2022

A turning point for UK mid-caps

by Mark Wright, CFA — Portfolio Manager

— Fearful investors heading for the exit have crushed valuations this year by driving down share prices.

So far, the year 2022 has been one that investors in UK mid-capitalisations (mid-caps) would probably prefer to forget. The first six months of this year witnessed the worst relative performance of UK mid-caps vs UK large capitalisations (caps) on a rolling six-month basis since 1986 (as far back as I could find data). By 30th June, they had underperformed UK large caps by a staggering 18%. The performance gap has since widened a little to over 19% on a year-to-date basis. The absolute performance of UK mid-caps is not as stomach churning, but at -15% it is still poor.

Market Snapshot

    • Global equities returned 1.1% last week
    • Most World indices saw positive returns
    • Brent crude rose 2.3% to $85.57 per barrel
    • Gold rose 2.4% to $1797.63 per ounce

Global Matters Weekly – 28 November 2022

Has gold lost its shine?

by Stephen Nguyen, CFA — Portfolio Strategist

— Historically, gold has proven its ability to preserve its purchasing power when compared to fiat money as it cannot be devalued by central banks

As we approach the end of 2022, it is worth reflecting on asset class returns this year. Global equities and bonds have both suffered significant declines and as a result the traditional balanced portfolio, anchored by these two asset classes, has struggled. Risk assets have had a torrid time due to a combination of factors including bleak economic and earnings outlooks, inflation concerns and heightened geopolitical tensions, which have all weighed on investor sentiment. Surprisingly, gold which has traditionally been deemed as a ’safe haven’ asset has also disappointed this year. Gold is often thought of as a hedge during market downturns and in an inflationary environment, so why has it struggled this year? And does it still warrant a place in investors’ portfolios.

Market Snapshot

    • Global equities rallied 1.7% on the week
    • China locked down one-fifth of the country due to a COVID-19 outbreak
    • Brent crude lost 4.6% on the week, down to $83.6 a barrel
    • Gold returned 0.2% on the week to trade at $1754.9 an ounce

Global Matters Weekly – 21 November 2022

The World Cup effect

by Gary Moglione — Portfolio Manager

— If the S&P 500 declines over the next month you can be confident that the subconscious actions of billions of heartbroken football fans will be partly to blame

As a keen student of behavioural investing, I love reading articles on how human behaviour is influenced by emotion and how this translates to stock market movements. If only there was an event that stirred up extreme emotions that the majority of the world will participate in. It just so happens that the FIFA World Cup is here, and according to audience data around 3.6 billion people watch the tournament on television.

Market Snapshot

    • Global equities rose 6.7% last week
    • Last week saw US midterm elections, key developments for Ukrainian forces, and a below-expectations Consumer Price Inflation (CPI) report that gave the market signs of a potential Federal Reserve (Fed) pivot
    • Brent crude fell by 2.6% over the week to $96.0 a barrel
    • Gold rose by 5.3% to $1771.2 per ounce

Viewpoint – October 2022

After the sharp falls in September, there was some respite for investors in October, with a strong rally in equity markets. Led by the US, +8.1%, the MSCI World Index of developed markets returned 7.2% in the month, recovering all the ground lost in Q3.

Global Matters Weekly – 07 November 2022

Yet another update on China

by Lorenzo La Posta, CFA — Portfolio Manager

— China is facing a different set of issues that still have global consequences

For some reason, any time it’s my turn to write our weekly Global Matters blog, there is something happening in China worth writing about. Or perhaps, it is just my colleagues deliberately leaving me with the honour of updating our readers on the latest developments within the Chinese walls (pun intended). Luckily, these days we are not short of significant news and while the west is struggling with rising rates and elevated inflation, China is facing a different set of issues that still have global consequences.

Market Snapshot

  • Global equities fell 2.1% last week
  • Early voting in the US midterm elections has begun, with Republicans expected to take control of the house and gain a slim minority in the Senate
  • Brent crude rose by 2.9% over the week to $98.6 a barrel
  • Gold rose by 2.3% to $1681.9 per ounce

Global Matters Weekly – 31 October 2022

Will the strong dollar continue to spook markets?

by Robert White, CFA — Portfolio Manager

— At times such as this it is important to remember that the global economy is cyclical

We are living in a dollar-dominated world, a fact most famously captured by John Connally, President Nixon’s Treasury Secretary, who once told a group of global finance ministers “the dollar is our currency, but it’s your problem”. Students of economic history will be aware of the disruption that a strong US dollar can cause, however, at times such as this it is important to remember that the global economy is cyclical, and such periods eventually do pass.

Market Snapshot

  • Global equities returned 4% last week
  • Developed markets saw positive returns whilst emerging markets were a mixed picture with China notably seeing a large decline
  • Brent crude oil rose 2.4% last week to $95.7 a barrel
  • Gold fell 0.8% last week to $1644.9 per ounce

Global Matters Weekly – 24 October 2022

(IL)Liquidity of Property

by Jackson Franks — Analyst

— Open-ended property funds are not the only way to gain direct exposure to the property market

As mentioned in my previous blogs I am an avid Watford football club supporter. Although there are some ups and (a lot more) downs, being a Watford supporter has had one positive outcome. It’s enabled me to cope with the ever-changing UK political situation. Since David Cameron resigned as Prime Minister in 2016, following the UK’s vote to leave the EU, there have been three UK Prime Ministers over the preceding six years, with the fourth set to be announced.

Market Snapshot

  • Global equities rose by 3.6% last week
  • Xi Jinping was declared as the Chinese Communist Party Chief for a third time as he further consolidated his grip on power. His third term as General Secretary will make him the longest ruling Chinese leader since Chairman Mao
  • Brent crude rose by 2.0% over the week to $93.5 a barrel
  • Gold rose by 0.8% to $1657.7 per ounce

Viewpoint – September 2022

The third quarter started with bond yields falling, equities in the midst of a sizeable rally, and a perception that increasing evidence of a slowdown in the US and Europe would lead to a relatively short tightening cycle and a more dovish Fed. It ended with an increasing probability of recession, yet the most hawkish Fed since the Volcker era, bond markets in disarray and equities at new lows for this cycle.