The road map to success
by Stephen Nguyen, CFA

At today’s historically low yield levels, bonds offer significantly less protection and diversification benefit compared to the past. In this new low rate environment, the traditional ‘balanced’ portfolio may no longer be balanced. We spend a lot of time deriving the optimal SAA for our clients. Our optimisation is multi-faceted and goes beyond simply maximising returns for a given amount of risk. We include a wider range of asset classes in our SAA’s to increase the naturally occurring diversification benefits and consider how those asset classes behave in combination with one another. Based on these optimisation metrics, we then generate thousands, sometimes millions, of possible portfolio combinations.

Market Snapshot

• A mixed picture as global equities returned 0.4% last week
• Global deaths from Covid-19 surpass 800K
• Brent crude fell 1.0% ending the week at $44.4 a barrel
• Gold fell -0.2% to end the week at $1940.5 an ounce

Fast forward 10 years
by Jackson Franks

Former R&B singer and now entrepreneur Akon, announced in January 2020 that his vision to develop Akon City is becoming ever closer to reality. Situated in a small coastal village in the west of Senegal, Akon City will be 100% cryptocurrency based with AKoin (a cryptocurrency established by Akon) at the centre of all transactional life. Although I don’t see the world being run on cryptocurrency anytime soon, I do believe the real estate assets we see today will look and feel very different ten years from now.

Recently, Simon Property Group, a mall operator, announced they are in talks with Amazon about turning their department-store sites into Amazon fulfilment centres.

Market Snapshot

• The S&P 500 index moved to within 0.2% of its all-time high in February
• Russia announced regulatory approval for a vaccine – the first country to do so
• Brent crude rose 0.9% ending the week at $44.8 a barrel
• Gold fell -4.4% to end the week at $1945.1 an ounce

Safe Hands for Troubled Times
by Robert White, CFA

In a world where unprecedented events seem to be happening with regular occurrence, it is more important than ever to find stewards of capital with the talent, temperament and expertise to navigate through such uncertain times. This is no easy task and recent studies have reminded us that past performance in isolation is not a sufficient guide. Here at Momentum, we believe the key lies in thorough due diligence backed by an experienced and independent research team.

Market Snapshot

• The tech rift between the US and China intensified last week.
• A positive week for markets as global equities rose 2.2%.
• Brent crude rose 2.5% ending the week at $44.4 a barrel.
• Gold rose 3.0% to $2035.5 an ounce

Spaghetti Western
by Lorenzo La Posta

“Year 1862: amid the chaos of the American Civil War, the three gunslingers Blondie, Angel Eyes and Tuco (a.k.a. the Good, the Bad and the Ugly) are competing to put their hands on a buried cache of gold, but onl– “…wait! I got it wrong. It was something like: “Year 2020: amid the chaos of a global pandemic, some industries thrive (the Good) as others go through a rough patch (the Bad), while countries, economies and societies strive to recover from their wounds (the Ugly)”. This year, the outcomes have been more extreme than most Hollywood creations. Let’s just hope there will be no sequel to this tragic period.

Market Snapshot

• The US Dollar had its worst month for a decade
• Moderna has begun its late-stage vaccine trial on 30,000 people in the US
• Brent crude fell -0.1% ending the week at $43.3 a barrel
• Gold rose 3.9% to end the week at an all-time high of $1975.9 an ounce

How flow can you go?
by Alex Harvey, CFA

After a bumper few months for equity markets, a recent report from Calastone, the global funds network, showed June was one of the worst months on record for outflows from UK equity funds. That follows positive UK market performance for each of April, May and June. The selling was broad based with even passive funds showing a rare negative flow print, so why the rush for the door and are investors cashing in their UK equity chips too early?

Market Snapshot

• US-China tensions rise, EU members agree firm recovery path
• Global Covid-19 cases top 15 million
• Brent crude rose 0.5% ending the week at $43.3 a barrel
• Gold rose 5.1% to $1902.0 an ounce as metals rallied

2020 – a rollercoaster ride
by James Klempster, CFA

How to sum up 2020 so far? A rollercoaster is probably the best way to describe it; both from an emotional perspective but also in terms of what the markets have been up to. Over the first quarter, market participants went from being blissfully ignorant to a state of panic as the significance of global lockdowns became apparent and investors were left wondering what the crisis would mean for the economy and companies; not to mention the humanitarian cost.

Market Snapshot

• Cases of Covid-19 have reached 14 million globally with over 600k fatalities
• The S&P 500 reached its highest intraday level since February
• Brent crude fell -0.2% ending the week at $43.1 a barrel
• Gold rose 0.7% to end the week at $1810.4 an ounce

Socially (Un)Acceptable
by Michael Clough

The inexorable growth of environmental, social and governance (ESG) awareness has been impossible to ignore. Social criteria can be difficult to measure and they don’t necessarily lend themselves to quantitative metrics that environmental and governance matters might. Whilst simple screens may highlight certain ESG risks at a company. Critics have said the coronavirus pandemic and resulting economic implications might push ESG discussions down the agenda once again with strong balance sheets and profits trumping attractive ESG scores. That certainly doesn’t look to be the case.

Market Snapshot

• Cases of Covid-19 have reached 12 million globally
• Key US technology benchmark reaches new all-time high
• Brent crude rose 1.0% ending the week at $43.2 a barrel
• Gold rose 1.5% to end the week at $1798.7 an ounce

Lessons from Japan
by Richard Stutley, CFA

The summer solstice, or ‘longest day of the year’, took place in the northern hemisphere just over two weeks ago, putting those of us that live here on a path of gradually shortening days towards winter. It’s not all bad news: July and August are typically the warmest months in the UK, but after that temperatures will also steadily decline. It remains to be seen whether, like other airborne viruses, COVID-19 is more infectious in winter, leading to a fresh spike in cases, but in any event we think the world is significantly better prepared for new waves and hence the impact should be smaller. Therefore, while acknowledging this risk to markets, it has not persuaded us to de-risk the portfolios further.

Market Snapshot

• Global manufacturing PMIs show signs of recovery
• The WHO reported a one-day high in global coronavirus infections over the weekend
• Brent crude rose 4.3% ending the week at $41.02 a barrel
• Gold ended the week flat at $1771.29 an ounce

TISATAAFL
by Andrew Hardy, CFA

Not that there aren’t enough acronyms flying around the investment world already, but today I will reference a lesser known one – only to debunk it. TANSTAAFL: “there ain’t no such thing as a free lunch”. The etymology is uncertain, but the principle is intuitive; there aren’t many things in life that come for free without some form of cost, be it direct or indirect, explicit or implicit. However, there is one (and only one) in finance – diversification. Most famously highlighted by Harry Markowitz, Nobel Laureate and pioneer of investment theory, this has underpinned several decades of progress towards building more sophisticated, more resilient approaches to portfolio management.

Market Snapshot

• Global reported cases of Covid-19 passes 10 million with over 500k deaths.
• IMF revise outlook on global economy: now forecast a -4.9% contraction vs -3.0% previously.
• Brent crude fell -2.8% ending the week at $41.0 a barrel
• Gold rose 1.6% ending the week at $1771.3 an ounce

The Great Disconnect?
by Stephen Nguyen, CFA

There are few certainties in markets and economies and with most countries globally facing what could be the worst economic collapse in the post-war era, it is surprising to see markets and most risk assets continue their remarkable rebound. The shape of the recovery in risky assets certainly looks V-shaped today, as most markets have posted gains of around 30% since bottoming near the end of March. Is this a true reflection of what is going on in the underlying economy or is there a big disconnect?

Market Snapshot

• Estimations now show that 24 of the 50 US states have a R value over 1
• Oil prices rose for the 7th week out of the last 8 as OPEC+ confirmed output cuts
• Brent crude rose 8.9% ending the week at $42.2 a barrel
• Gold rose 0.8% ending the week at $1743.9 an ounce