The pullback in global stock markets towards the end of 2018 proved to be short lived and markets continued their upward trajectory during the second quarter. Equity markets recovered from their mid-quarter lows, associated with the collapse of trade talks between the US and China, as central banks adopted an easing bias in response to weaker economic news flow and the persistence of low inflation. Across the other main asset classes (government bonds, property and corporate debt), all posted positive returns, all largely driven by central banks committed to their recent dovish pivot.
As regular readers will know we are not macro investors, but neither do we operate in a bubble without regard for the mood of ‘Mr. Market’ (the personification of the average investor, as described by legendary investor Ben Graham). Anecdotally, it appears to us that investors’ willingness to accept higher risks for lower expected returns has increased and should give the cautious investor pause for thought. Comparisons with the excesses of the late 1990s abound, but there are big differences too. In that context, the current mood of stock market positivity could credibly endure, or even grow, from here. Rest assured we are not being complacent and continue to evaluate our options to deliver you the best risk-adjusted returns we can.
The Setanta fund commentaries discuss, among other things, extended equity market valuations, negative yields in bond markets, recent activity in the IPO market and out of favour pockets of the stock market. The fund commentaries also review portfolio activity and describe the positioning of the funds looking ahead.