All posts in category: United Kingdom (21)

Bouncing Britannia

Thursday, January 17th, 2019

A recovery in UK Equities could also benefit the Eurozone

Our models suggest that the UK is recovering relative to global equities. They also suggest that major international investors who were worried about Brexit have long since reduced their exposure to the bare minimum. Predicting the shape of the final deal is still very difficult, but if there are no more sellers….

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Straws in the Wind

Wednesday, November 21st, 2018

A time for observation not forecasts

Forecasting with precision all the components of a bear market is very difficult. Observing the increasing number of signals which point in that direction is much easier. These range from US high yield to Eurozone government bonds and US and European equity strategy. It’s not all bad news. There are some positives, such as the potential for a surprise in UK Equities, and a message to buy duration in US Treasuries. However, the overall message from these straws in the wind is very powerful.

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Lost in Translation

Wednesday, September 26th, 2018

China and the US disagree about more than trade

There is a fundamental conflict between the bearish sector stance of our Chinese equity sector model and the bullish positioning of the US model. We don’t think it is possible for these two sets of sector recommendations to remain unchanged without having an impact on each other or the rest of the global equity universe. On balance we think it is more likely that the US will come to resemble China, rather than the other way around.

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Where are all the good ideas?

Wednesday, June 6th, 2018

Without them, equities may struggle this summer

There are very few sectors or countries which currently offer a better than 50% chance of beating the local risk-free, which is one of the reasons why we think that global equities will struggle over the summer. The UK has the highest concentration of winners. Healthcare and Utilities garner most mentions across all regions.

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Few places to hide

Thursday, May 3rd, 2018

UK portfolios could be vulnerable to rising oil

We are concerned that oil may be entering a new trading range which could damage a conventional balanced portfolio. We look at two correlations: between equities and bonds and between oil futures and a balanced portfolio. In the Eurozone, investors don’t really need a hedge. In the US, it may be “nice to have”, but not essential. In the UK, equities and bonds are positively correlated at the highest level since 2001, which means that investors need some sort of hedge, even though we can’t yet be sure that oil is the right one.

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Selectively Europe

Wednesday, April 18th, 2018

It’s still a relative call

By the time equities regain traction relative to fixed income, we believe Europe will provide the leaders. The main reasons are abnormally low volatility compared with the US and global equities and the ongoing stabilisation of the trade-weighted dollar index. Our preferred countries are the UK, France and the Netherlands. It is too early for Germany and Spain, and maybe too late for Italy. Avoid Switzerland, Sweden and Austria.

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Delivery, not Potential

Wednesday, March 21st, 2018

European equities need some momentum soon

Equities in the Eurozone and the UK are not delivering the same returns as the US. This holds true for most sectors as well as the top-level index. Part of the problem stems from the weak dollar, but as most investors did not expect this, they find it hard to forecast the turn. Sooner or later investors will have to respond to this problem.

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One of Us Is Wrong

Wednesday, March 14th, 2018

Defensive underweight contradicts top-down view

Our models show a clear contradiction between the neutral recommendation for European equities vs fixed income and the all-time record underweight in defensives, which we discussed two weeks ago. There is normally a good correlation between a bearish view on equities and defensives, but over the last year this has turned negative in Europe. The US and Japan do not share this problem. It’s one that Europe needs to resolve.

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Final Thoughts & First Decisions

Wednesday, December 13th, 2017

The agenda for January starts to take shape

It’s too late to make any significant adjustments to the portfolio this year, but there are several themes which may have matured sufficiently to be immediately actionable when markets restart in January. On the downside, we may have to cut exposure to China and to the Technology sector in the US, and globally. On the upside, there may be an opportunity in UK equities and certain defensive sectors like Staples and Telecom.

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Three Unrelated Ideas

Wednesday, February 1st, 2017

Energy, Spain and Small Caps

Nothing has happened to move the dial on any of our major themes; so this a time for housekeeping and some small ideas. The three we have chosen are: reducing exposure to the Energy sector, using Spanish government bonds as the safe-haven against election shocks in Europe, and increasing exposure to UK and Eurozone Small Caps.

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