Imperium Capital Publication

Global Matters Weekly – 2 November 2020

Inflated expectations?
by Stephen Nguyen, CFA

It has been one of the main discussion points of the past three years, five years and even decades in the case of Japan: will inflation return? Low prices and ultra-low rates must surely end at some point; or maybe not… We are amid a pandemic and going through a period of depressed economic activity, so why would inflation even register on investors’ radars? As an asset allocator, it is imperative we consider what might happen to inflation and inflation expectations in the coming years in order to effectively build robust portfolios for our clients.

Market Snapshot

  • Global equities fell -5.6% on the week as the number of Covid-19 cases surged in Europe and the US
  • The US economy expanded at a record 33.1% annualised rate in Q3, which beat market expectations
  • Brent crude fell -10.3% ending the week at $37.5 a barrel
  • Gold fell -1.2% to end the week at $1878.8 an ounce

Global Matters Weekly – 26 October 2020

ESG: Don’t be a spectator
by Jackson Franks

Environmental, Social and Governance (ESG) investing is at the forefront of most investors’ minds and the real estate sector is no exception. A survey published by Bentall Kennedy, Real Property Association of Canada (REALPAC) and the United Nations Environment Programme Finance Initiative (UNEP FI), which included investment managers representing over $1 trillion in assets under management from North America, Europe, and the Asia-Pacific region found that 93% of investors include ESG criteria in real estate investment decisions. At Momentum we are no different.

Market Snapshot

  • Global equities returned -0.4% last week amidst a lack of direction on stimulus measures and rising Covid-19 cases
  • Polling around the US presidential race still points to a victory for Joe Biden
  • Brent crude fell -2.7% ending the week at $41.8 a barrel
  • Gold rose +0.1% to end the week at $1902.1 an ounce

Global Matters Weekly – 19 October 2020

Relationship Problems
by Robert White, CFA

With the US election now just two weeks away, investors are busy forming expectations on the result and looking at the potential policy implications of either a Biden or Trump victory. While there is plenty of short term focus on the eventual shape of any additional stimulus package to emerge from Congress, perhaps the most important issue for long term investors will be how US-China relations develop from here. For those wanting a detailed outline of our thinking on this issue, we have recently published a thought piece in addition to this week’s blog which is available here.

Market Snapshot

  • A relatively flat week for global equities which returned -0.3%
  • The IMF upgraded their global growth projection to a -4.4% contraction this year, from a -4.9% contraction forecasted in June
  • Brent crude rose +0.2% ending the week at $42.9 a barrel
  • Gold fell -1.6% to end the week at $1899.3 an ounce

Global Matters Weekly – 12 October 2020

Ipse dixit? No, thanks
by Lorenzo La Posta, CFA

Pythagoras was a clever man: philosopher, cosmologist, musician and mathematician. His famous theorem within Euclidean geometry is one we all learn at school, despite the 2500 years that have now gone by since the man lived. His opinions were so well respected that his disciples across Magna Graecia would appeal to his assertions, rather than to evidence or reason, as a watertight argument. They would simply use the formula “ipse dixit”, literally meaning “he said so”. We, at Momentum, are no Pythagoreans and do not accept dogmatic assertions from anyone, nor do we blindly trust common knowledge. All we trust is evidence and when this is not given to us, the scavenger hunt begins.

Market Snapshot

  • A strong week for global equity markets which returned 3.6%
  • Optimism grows that a US stimulus deal will be reached
  • Brent crude oil rose 9.1% to $42.8 a barrel
  • Gold rose 1.6% to $1930.4 per ounce

Global Matters Weekly – 5 October 2020

The Perfect Storm
by Alex Harvey, CFA

If readers cast their minds back to February this year, they will remember the horror that unfolded on the high seas with dozens of cruise ships being forced to stay at sea as the first wave of Coronavirus took hold. The poster child for the industry was the ‘Diamond Princess’, a Gem-class cruise ship with a capacity of nearly 2700 passengers and 1100 crew, which eventually anchored at Yokohama port in Japan where passengers had to remain on board and self-isolate for several weeks. The world watched on thinking perhaps this would be contained to Asian shores but of course this was wrong as we now know. Global equities would continue to make gains for almost three weeks after the cruise liner had docked before freefalling, only to reach a bottom just over a month after that. Far from plain sailing.

Market Snapshot

  • A relatively strong week for global markets which returned 1.6%
  • President Trump and the First Lady test positive for coronavirus
  • Brent crude fell -6.3% ending the week at $39.3 a barrel
  • Gold rose 2.1% to end the week at $1899.8 an ounce

Global Matters Weekly – 28 September 2020

The long & short of what’s next
by James Klempster, CFA

This week heralds the start of the final quarter of 2020. What an extraordinary year it has been thus far. Of course, for investment managers, the key area to focus on is what next? This question can have multiple different dimensions. For example, the answer might be very different if we are focusing on the long term as opposed to the short term. We have made the point repeatedly that in the long run we will cast this virus off. It remains a truism that the virus is not unpicking the very fabric of society nor is it destroying the functioning of capital markets and as a result, from an investment perspective at least, we will get through this.

Market Snapshot

  • Sell-off in global risk assets
  • Uptick in coronavirus cases hampers service sector
  • Brent crude fell 2.9% to $41.9 a barrel
  • Gold fell 4.6% ending the week at $1861.6 per ounce

Global Matters Weekly – 21 September 2020

Staying out of the rough
by Michael Clough

This year has obviously been far from normal and the Covid pandemic meant the US Open, normally held in June, was pushed back to a late summer week in September. The US Open is regularly dubbed the ‘toughest test in golf’. One of the reasons is long, thick grass (known as rough) which sits unsettlingly closely to the finely manicured fairways, punishing any marginally errant shot. Within equities, growth exposure has been the equivalent of finding the fairway this year, whilst sole exposure to value has been akin to hacking through the deep rough.

Market Snapshot

  • Global Covid-19 infections exceed 30 million with the global death toll approaching 1 million.
  • A mixed week saw global equities ending the week flat
  • Brent crude rose 8.3% to $43.2 a barrel
  • Gold rose 0.5% to 1950.9 per ounce

Global Matters Weekly – 14 September 2020

by Richard Stutley, CFA

Realpolitik is the art of designing policy based on practical rather than ideological considerations: what works, not what we think should work. Pragmatism is an important part of investing and tells us that positioning too aggressively around political events like Brexit and the US election is risky, because both the result and the market outcomes are difficult to predict. Given a low probability of correctly predicting either, we need to see evidence of significant mispricing in order to introduce large positions in our portfolios.

Market Snapshot

  • A mixed week for global equity markets which returned -1.3%
  • Vaccine trials resume after last week’s pause
  • Brent crude fell -6.6% ending the week at $39.8 a barrel
  • Gold rose 0.3% to end the week at $1940.5 an ounce

Global Matters Weekly – 7 September 2020

Yellow metal, green lights
by Andrew Hardy, CFA

Gold has outshone most other investments in 2020, having broken through to new all-time highs in July, surpassing levels last reached nearly 10 years ago. Year to date the bullion price has increased by 27%, trumping all broad equity markets and most other assets – only the tech heavy NASDAQ index has kept pace. Over five years, gold has risen by over 70%. Today’s market and economic conditions go a long way towards justifying these gains though and we remain committed holders within our multi-asset portfolios.

Market Snapshot

  • After their best month since April, US equities fell back last week
  • The CDC in the US has warned health officials to be ready to distribute a vaccine by the 1st November to at-risk individuals
  • Brent crude fell -5.3% ending the week at $42.7 a barrel
  • Gold fell -1.6% to end the week at $1933.9 an ounce

Global Matters Weekly – 24 August 2020

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