by Andrew Hardy, CFA
With the skies and borders mostly open for international travel again, I’ve been visiting our parent company’s home market of South Africa this past week, a welcome opportunity to catch up with colleagues and clients in person. The hot topic has been investing overseas, following the local central bank’s recent relaxation of offshore investment limits; now investors can take up to 45% overseas. One of the many questions this brings into focus – for investors there but also around the world – is the risks that come with having so much of a portfolio invested overseas, and how best to manage them
- Global equities declined 2.1% last week
- Goldman Sachs have cut US growth forecasts.
- Brent crude fell 0.7% to $111.5 a barrel
- Gold fell by 3.8% to $1811.8 per ounce.
The war in Ukraine, and widespread evidence of Russia’s depravity as its advance falters, continues to cast a dark shadow over the world. With Russia’s invasion now into its third month, and both sides increasingly intransigent with no signs of a negotiated end in sight, the probability of a long, attritional war is rising. The longer the war drags on, the greater the risk of longer lasting economic damage, transmitted primarily through global energy and agricultural commodity prices. Yet in April it was deepening worries about economic imbalances, which had been developing long before the invasion, that drove financial markets – ultra-loose monetary and fiscal stimulus adding fuel to the fire of post-pandemic release of pent-up demand, triggering excess demand in supply-constrained markets, in turn leading to high and persistent inflation.
Central banks get serious
by Robert White, CFA
After the first 50bps interest rate rise by the Fed in over 20 years (with more to come) and the announcement of quantitative tightening starting in June, there is no doubt that the Fed is getting serious about containing inflation. Inflation data in April continued the pattern of the past year, generally exceeding expectations, with price rises becoming more broadly based and accelerating to multi-decade highs in the US and Europe.
Strong demand, supply chain shortages, and war in Ukraine have combined to push producer price inflation (PPI) in the US up by 11.2% in the year to March
- Global equities fell 1.1% last week.
- Most indices saw declines after a volatile week with interest rates and inflation fears weighing on sentiment.
- Brent crude rose 2.8% to $112.4 a barrel following an EU proposal to ban Russian imports.
- Gold fell 0.7% to $1883.8 per ounce
by Stephen Nguyen, CFA
As an avid sports fan, I have always enjoyed being involved in all things sports related. Having participated in various team-based and individual sports throughout my life, I of course enjoy watching a variety of different sports, be it golf, tennis, or football. Sporting events often bring people together and teach us the importance of values and hard work. If we look at successful sports teams or individuals, there are lots of similarities that can be drawn between them and professional investors
- Global equities declined 2.6% last week
- Lockdown restrictions widen in China as concerns escalate in the capital Beijing
- Brent crude fell 4.5% to 1067 a barrel amid concerns about China’s demand and after Libya said it would resume output at its closed fields in the coming days
- Gold fell by 0.2% to $1,931.6 per ounce
The benign conditions enjoyed by financial markets in the 18 months since the depths of the pandemic were well and truly shattered in the first quarter of 2022, driven by two powerful shocks, both largely unexpected and each with huge consequences globally: Russia’s invasion of Ukraine and the Fed’s very sharp hawkish shift in policy. The immediate consequences of the war produced surges in energy prices and further disruptions to key commodity markets and supply chains, adding to the damage inflicted by the pandemic. But away from commodities, there were few markets that could withstand the heightened risk of a significant slowdown in global growth and much higher interest rates than anticipated only a few months earlier.
Whatever it takes, China
by Lorenzo La Posta, CFA
This is not the first time I have written about Chinese equities and loyal readers will remember last August, when the media were calling it an “uninvestable” market, we were finding pockets of value and interesting opportunities. This year, a new wind is blowing under the Red Dragon’s wings.
But let’s rewind the tape and press play on February 2021. Valentine’s Day had just gone, the stock market was at a peak, but no one knew what was coming
- Global equities fell -1.4% last week
- President Macron is set to face far-right rival Marine Le Pen in the second and final stage of the French presidential election in two weeks’ time
- Brent crude fell -1.5% over the week to $102.8 a barrel
- Gold returned +1.1% to $1947.5 per ounce
by Alex Harvey, CFA
Covid travel restrictions have now finally been lifted for passengers arriving in the UK. I’ve been fortunate to travel abroad in recent months including a trip to Jordan, with its rich cultural heritage spanning ancient civilisations and sites sacred to Christianity, Judaism and Islam. One regional constant over the millennia has been the Dead Sea; the world’s deepest hypersaline lake. Its shores emerge from a depth of over 300m to mark the lowest land elevation on our planet at 430 metres below sea level
- Global equities increased by +0.3% last week.
- Russian and Ukrainian negotiators will resume remote talks today.
- Brent crude decreased by -13.5% to $104.39 a barrel on plans for a release of US reserves.
- Gold decreased by -1.7% to $1925.68 per ounce
It’s lights out and away we go
by Matt Connor
The first race of the 2022 Formula One season didn’t disappoint, as Sir Lewis Hamilton sought a strong start to his record-breaking 8th World Championship in Bahrain. Many were quick to write off the Mercedes man, due to a lack of pace in free practice and qualifying compared to rivals Ferrari and Red Bull. Despite the negative outlook, Hamilton still managed to achieve a podium. As value investors we often view negative sentiment around a company as a potential opportunity to capitalise on irrational valuations
- Global equities increased by +1.3% last week
- At the NATO summit, leaders said in their statement that the Russian use of chemical or biological weapons would result in severe consequences
- Brent crude increased by +11.8% to $97.9 a barrel
- Gold increased by +1.9% to $1889.3 per ounce
“There are decades where nothing happens; and there are weeks where decades happen.” Lenin
The quote is attributed to Lenin shortly before the Russian revolution. The week which started on February 24th, when Russia invaded Ukraine, is one of those weeks. Russia’s aggression and the unfolding humanitarian disaster have shaken the West to its core. The self-indulgent complacency spanning three decades since the fall of the Berlin Wall and the break-up of the Soviet Union has hit the brick wall of an existential threat to the liberal order of the democratic free World.
Metaverse: real estate
by Jackson Franks
The largest ever land acquisition took place towards the end of last year; it’s value:US$2,400,000. You may be thinking I’m missing a few zeros here, but what I haven’t yet mentioned is that this transaction does not relate to the real world but instead refers to Tokens.com’s purchase within the metaverse.
In November last year, Tokens.com’s subsidiary, Metaverse Group, paid more than US$2.4m for a plot of virtual land in the fashion district of Decentraland, one of several growing platforms within the metaverse. Although this amount may seem obscene to many readers (including myself), the more eye-catching fact here is that it accounted for less than 50bps of real estate sales within the metaverse for 2021
- Global equities rose +6.0% last week
- The Fed raised interest rates by 25 basis points ending the near-zero rates of the pandemic era
- Brent crude fell -4.2% over the week to $107.9 a barrel
- Gold returned -3.4% to $1921.6 per ounce