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Join our Chief Economist and Chief Investment Officer for an upcoming live webinar and Q&A session where they will discuss the global economy, markets and the investment landscape.
George Lagarias George is our Chief Economist and has almost 20 years’ experience in financial markets as an analyst, investment strategist, economist, and fund manager. George is a firm believer that investments should be client-centric and that ideas and perceptions should be placed at a public forum open to all stakeholders. Having joined the firm in 2016 George has previously worked for British asset managers EFG and Close Brothers as well as Greek private banks Alpha Bank and Eurobank and wealth manager Marfin. George is certified by the Chartered Financial Analyst (CFA) institute with the Investment Management Certificate (Level 4). |
Ben Seager-Scott Ben joins us as our new Chief Investment Officer. Ben has over 17 years of experience in active and passive investment strategies and specialises in overseeing a large range of central investment propositions, including Fund-of-Fund and managed portfolio services ranges. He is a member of the CFA Society of the UK and holds a CFA Charter. Ben has experience managing a range of teams, including research analysts, portfolio managers, stewardship/sustainable analysts, and strategists. Ben is regularly cited in the press as an investment expert. |
US equities reached correction territory before rebounding on Friday. What we have been living is not investors pricing in a brand-new economic reality, as much as a healthy reaction to a very expensive US, tech-driven equity market.
Economic uncertainty mirrors pandemic levels as new US administration shakes global markets.
Moving beyond the acrimonious politics, markets are now worried about a possible demand shock in the US.
From the impact of tariffs and trade wars to the cautious outlook of major corporations, in this update, we dive into how investors can navigate inflationary pressures and market volatility.
The world is changing fast, perhaps too fast and profoundly for risk markets to price everything in. The one thing we know for sure is that taking the present status quo and projecting it into the future in perpetuity will almost certainly lead us to wrong conclusions.
In the past few weeks, the US president has kept financial markets and business leaders on their toes. With a surge of incoming information, analysts and investment managers know that systemic risks are rising, but how best can they navigate these changes?
This past week was predictably eventful, and the upcoming week promises to be even more so. The US President continued his reshaping of both the American and global economy, imposing 25% tariffs on Mexico and Canada and an additional 10% on China beginning on 1 February, promising that Europe is next.
What are the two things history students agree on? One: Every action invites a reaction, whether immediate or delayed. That’s how the wheels of history turn. And turn they do. Second: The full extent of consequences of actions may take years to play out, and even more to comprehend. No student of history, no matter how astute, can accurately predict the future based on knowledge of the past.
Looking ahead in 2025, there are obvious challenges to the global trade environment, whilst above-target inflation and the resulting elevated interest rates add further grit to the wheels of the global economy at a time when equity valuations are looking a little expensive. At the same time, acute recessionary and inflationary risks have diminished, meaning we remain essentially neutral in terms of...
Donald Trump officially became President of the United States of America for the second time. In the last few days, we have heard a lot about the new President’s plans: a precipitous hike in tariffs, deregulation in the bank, tech, energy and pharma sectors, reducing corporate taxes, a “cultural revolution”, ending global strife, rewriting global borders, ending illegal immigration… and so much more.
Forecasts are at the heart of investment management. Understanding the world as is, even perfectly, offers little value to investors, as that knowledge is “priced in” by financial markets. Forecasts, putting a price on future events, such as earnings, economic growth, inflation, etc, are where the true value lies.
French yields rising ahead of a government no-confidence vote worried investors. However, despite the constant debt buildup, big countries don’t get debt crises easily.
In the economic outlook season, the key theme is policy uncertainty. Change will accelerate, some of it will be good and some of it will be a miss.
In the past few days, markets have been cheering at the prospect of deregulation, especially in the banking sector. The US election has become a catalyst for many government officials, across both sides of the Atlantic, to come out and advocate for deregulation. While upping economic and financial risk, it could be the key to unlocking economic growth in the years to come.
The global economy is entering a more synchronized part of the cycle, but economies diverge.
The three things investors should know this week:
The argument here is very simple: it may not matter who holds power today, over the longer term. We assign an era to a person (i.e. the ‘Obama Era’) but that person may not be as responsible as we think for economic outcomes. Presently, we are faced with a coin-toss election in the US.
Do as the teacher says, not as the teacher does, an old saying goes. The exact opposite of that should apply to keeping up with the Federal Reserve. We have reached a point where we need to monitor the Fed’s actions ex-post, much more so than the narrative and justification for those actions or any comment about future intentions.
The US Federal Reserve came under severe criticism in 2022 for underestimating inflation and allowing it to run off. While there were externalities linked to price hikes (the war in Ukraine), the US Central Bank was widely panned for its certainty that inflation was “transitory”. It thus set a very hawkish course for interest rates that bond markets especially were not ready for, causing the sharpest...
In Business School, they tell you about accounting, business valuations, business strategy, interest rate theory, asset management, economics, currency parities, valuing options, alpha, beta, delta, theta and so, so much more. What they don’t tell you is that real portfolio management largely consists of following and dissecting the word of central bankers. ‘Don’t Fight The Fed’ is a time-tested principle,...
When financial professionals discuss derivatives, they usually talk about futures, swaps, and options. However, Nivida’s price falling 7% after posting second-quarter results that were ahead of consensus estimates seems to have the markets talking in derivatives, in a very different way.
Money management is less about managing returns, which one can’t really control, and more about managing risks. The manager who underestimates risks can be caught off-guard when they spike. The manager who overestimates them can leave a lot of money on the table, to the dismay of their clients.
Jackson Hole, Wyoming, is a valley in North America, wholly unremarkable in history for anything other than it was named by someone called Jackson who caught beavers. Yet once a year, when the US Federal Reserve meets there, the eyes of the economic and investment world are fixed on this tiny area in the Rocky Mountains.
In the last three weeks, global stocks have sold off, wiping out nearly $3tn or -4.5% of their global capitalisation, while global bonds have gained +3.5% by the close of Friday 2 August. Just this morning, Japanese stocks (which trade between 24:00 and 06:00 in UK hours) fell by -12.4%, the worst single-day drop since 1987.
As expected, the Bank of England (BOE) has cut interest rates by 0.25%. This is the first rate cut in more than four years and it appears that the Bank of England is finally prioritising growth over inflation.
John Buchan (1875-1940), First Baron Tweedsmuir, author of “The Thirty-Nine Steps” and General Governor of Canada once said: ''You think that a wall as solid as the earth separates civilization from barbarism. I tell you the division is a thread, a sheet of glass. A touch here, a push there and you bring back the reign of Saturn.''
The global economy slowed down somewhat in the first half of the year, as rate hikes in the previous months moderated demand. However, growth rates are still mostly positive, without major recessions.
The world looks like a better place in the last few weeks. In France, Mr Macron managed to hand an electoral loss to surging Ms Le Pen. In the UK, the people decided overwhelmingly to install a moderate government with a strong mandate and possibly a more favourable eye towards Europe, after years of convulsions and five Prime Ministers, in the formerly ruling Tory party.
An exhausting two political weeks came to an end. The result was the return of Labour to Number 10 after fourteen years, an uncertain and shaky coalition in the French National Assembly, and an even shakier candidacy by President Joe Biden.
Elections often hold surprises. However, this UK general election did not. Rarely has a landslide victory for one party been so thoroughly predicted across political pundits and financial markets. As predicted, Labour won a significant majority, roughly 170 seats at the time of writing. Conservatives survived as the opposition party, and Liberal Democrats picked up a significant number of votes,...
There is a maxim I have learnt after a few hits in recent years: "Never underestimate the hedonism of the US consumer".
‘There are no dead ends in democracy’, a popular quote says. The democratic processes in at least 3 G7 countries are certainly grabbing all the attention.
One of the oldest tricks in real estate is comparison. If a real estate agent has an apartment they really want to push, they will never show it outright. Instead, they will show a client - a couple of bad apartments before that. Exasperated from the rounds and disappointed, the client is more likely to agree to the apartment the agent wanted to promote in the first place.
Sustainable investing has to be about aligning your money with your values, not outperforming the market.
The UK will join the US this week in reporting inflation data, while the Bank of England’s interest rate decision is set to follow soon after. Retail sales data will also be released for UK and US, which will provide additional insight into the situation of consumer spending.
The UK is one of those rare countries that enjoys a G7 status, boasts an important economy, the global language, and is home to one of the world’s largest financial centres. Many of the worlds important investors are graduates of British universities. In what is possibly a perversion of history, this fourth of July the world’s uninterrupted attention will be on Britain.
Global stocks and bonds rallied last week, on the back of slightly lower inflation and a string of relatively disappointing news for the US economy, which caused traders to increase their bets that the Fed could cut rates twice by the end of the year.
When the US CPI print came in for March at 3.5% it confirmed a trend of three consecutive US inflation numbers coming in above expectations.
A whole generation of investors who started their careers in the post-Global Financial Crisis (GFC) period have only experienced returns for emerging market (EM) equities which look like this:
One of the most frustrating things as a financial professional over the years, is the association of the term “markets” mostly with equities. “Global markets rebound”, mostly means “global stocks rebound”. “Global markets in trouble”, usually refers to an equity rout.
With the arrival of our new Chief Investment Officer, Ben Seager-Scott, Chief Economist, George Lagarias, asked Ben some questions on our portfolios and the future of investing.
Since the beginning of the pandemic, global stock markets have gained +48%. At the same time, the US stock market has increased its capitalisation by 69%, led by the tech sector which more than doubled in value, gaining 134%. Those numbers come against a backdrop of lockdowns, trade wars, broken supply chains, below-trend economic growth, high inflation and fairly restrictive monetary policy. Ex-technology,...
Global equity markets entered 2024 with significant momentum from the last two months of 2023 fueled by falling inflation and hopes of lower interest rates during the year. Despite a fast reduction of rate cut expectations in 2024, from 7 to 2 (and even possibly none) in the US, and persistent Quantitative Tightening, equities carried the momentum forward, gaining 7.5%, a full year’s return on the...
Of ancient soothsayers, Pythia, the high priestess of Apollo at Delphi, was considered the most reliable. Why? Because she was clever. She understood forecasting to be a dangerous business.
William of Ockham was a fourteenth-century English Franciscan friar. As an unusually clever person, he wasn’t very much liked by either the church (for insisting on inserting logic into theological discussions) or by the Pope himself.
In March 1738, a British mariner Robert Jenkins was ordered to testify in front of Parliament. He presented MPs with an unusually gruesome item: his decomposing ear. Seven years before, the ear had been severed by a Spanish officer off the coast of Florida. Parliament had had enough and voted to wage an outlandish war on Spain… over Jenkins’ ear. Eventually, the conflict merged with the 1742 War of...
A ‘poison pill' is a corporate tactic where companies resisting a hostile takeover somehow dilute shareholder worth. A common tactic is to take on large debt to make the company unattractive and scare the corporate raiders away.
In 2016, Ricardo Torres Martinez, a teacher, took his students to a farm in Apodaca, Mexico. He lined them up in rows in the Bull Ring and told them to sit absolutely still. Then he let the bull loose. Incredibly, the bull ran back and forth between the students, but, incredibly, no one was hurt. “The animal doesn’t attack. It just wants to be safe”.
Coming off the heels of Oscar night (Oppenheimer cleaned up and Robert Downey Jr. finally got a long-overdue Academy Award), I look at markets, and I am reminded of the final scene of Billy Wilder’s “Some Like it Hot” (1959).
Last week’s Core Personal Expenditure number, the Fed’s preferred gauge of inflation, continued to fall, down to 2.8% for the year.
Since the dawn of time, human beings have been nothing but tool users and toolmakers. Our insatiable hunger for the next thing always drives change. At some point in the early twentieth century, growth became exponential. It took us a little less than 400,000 years to learn to use the wheel. Yet we went from using gas lamps to exploring space in three generations. From there to global connectivity,...
Last week, I penned an article saying, “This equity rally has no (visible) legs”. Earnings are ok, but nothing to write home about. Rates by the end of the year will likely end up higher than what was priced in by the end of December, a theme which is playing out.
February 2024. Following three months of positive asset returns, many concerns which plagued individual investors in 2024 have fallen away.
February 2024. Mentions of AI and Artificial Intelligence on company earnings reports have skyrocketed over the last year. Ever since the release of OpenAI’s ChatGPT site, which is based on the GPT-3.5 and GPT-4 Large Language Models (LLMs), companies have wanted to claim that they are using AI, and are part of the AI revolution. The reality is very few will have the ability to develop AI models by...
The worst bull markets are by far the 'quiet ones'. A period of time when the index rises little by little per day, without any major breakouts and in the absence of a clear narrative. The less investors are convinced, the more excuses why it can’t last, the more persistent the rally gets. This isn’t karma. It’s about flows. The more money stays on the sidelines, the more money will go into markets...
90%. That’s the aggregate probability of a developed market recession this time last year by professional forecasters – yours truly humbly included. Economists often mock Wall Street by saying that it has ‘predicted' nine of the last five recessions. Or the International Monetary Fund (IMF), which hosts a top-line economic think-tank, and central banks all of whom last year saw economic difficulties...
“Countries don’t go bust”, Walter Wriston, Citibank’s president (1967-1984) famously said. Debt defaults are a complex political and social calculation and when they do happen, it is way before a country runs out of natural resources. Yet, of all the economic risks in the next few years, none may be as consequential as the accumulation of debt.
Global equity and bond markets enter 2024 with significant momentum from the last two months of 2023 fuelled by falling inflation and subsequent dovish projections from the US Federal Reserve.
After the Fed’s Dot Plot surprise in December, markets moved fast to price in several rate cuts in 2024. Perhaps a bit too fast? The jury is still out, with the debate raging as to whether the US Federal Reserve will lower interest rates as fast as the markets anticipate (six times this year) or less. I feel compelled to state three obvious points.
2023 was a slow and frustrating recovery train until late October, which then turned into a hypersonic rocket. What looked like a sub-par 2023 turned out to be a blowout in the last two months, in line with the kind of performance we expect following a bad year (2022).
Did the Fed change course? The Market may be asking the wrong question.
December 2023. Given the stock and bond market volatility, it’s hard to know what the starting point for equity valuations and rates as we enter 2024. At the beginning of the year, we said that volatility and geopolitical uncertainty will persist. Stocks and bonds were nearly flat by the end of October and are now up 10% and 5% respectively in just thirty days.
December 2023. Consumption is a key component of any modern society. It accounts for over 65% of GDP and is one of the most important indicators for assessing the health of an economy, with fluctuations in consumer confidence being a key indicator for predicting the speed of a recovery or the depth of a recession.
When we talk about risks, by definition we mean events or developments outside our base scenarios. The following risks are not, thus, our prediction of what will likely happen in 2024. Instead, we focus on how certain areas of politics and the economy may develop adversely enough to disrupt the base-case scenario and lead to different outcomes.
Stock markets continue to rally, performing their usual Christmas song-and-dance aided, presumably, by the tailwinds of more bullish projections around interest rates. A balanced portfolio performance is, as of this morning, roughly in line with what is expected after a bad year.
The correlation between stock and bond returns is a crucial element of asset allocation decisions. When stocks and bonds move in opposite directions, holding both can help reduce portfolio volatility. When they move together, diversification is less effective. Understanding this correlation helps investors build balanced and resilient portfolios.
November 2023. Despite growing calls for a global shift to clean energy, stocks in the sector are significantly underperforming the broader market. In fact, they're some of the worst performers this year.
On 22 November, the Chancellor will be walking the usual tightrope between delivering as much government spending as possible while preserving the state of the nation’s coffers but the constraints that he faces are unusually challenging.
Our Weekly Market update from our Chief Economist, George Lagarias, said: “Stocks have somewhat corrected, and futures traders have very short positions in bonds. There are now many scenarios in which one (or both) of these asset classes stage a rebound… and we should not write off 2023 just yet. September and October are historically the worst months of the year by far. This means that regardless...
Global equities had a volatile quarter, failing to find much conviction and ending down over -2%, albeit broadly flat in Sterling terms given a newfound weakness in the Pound. Bonds also struggled as interest rate expectations continued to grind higher. Index-linked gilts in particular sold off due to their longer maturity profile. Gold was flat for the period, while the cost of oil crept back towards...
“Neither a borrower nor a lender be, for loan both loses itself and friend. And borrowing dulls the edge of husbandry”, says Polonius in Hamlet.
After 18 months of uninterrupted interest rate hikes, most central banks in the developed world have reached or are very close to their interest rate peaks.
October 2023. The US yield curve is now back in the spotlight, with a big deal made of “bear steepeners” and “disinversions”. But what exactly do these terms mean, and how will they affect markets?
October 2023. If you have been reading the economic news over the summer months, you may have noticed that the Chinese economy has been a focus of the financial press. The Economist devoted two covers to this issue while the FT and the WSJ dedicate many long columns to the Asian economy.
October 2023. Making investment decisions is sometimes more of an art than a science, and the mere existence of the Efficient Market Hypothesis tells us that trying to predict market movements is, at the very least, notoriously challenging.
October 2023. When it comes to our emotions, we can honestly say that sometimes they make us a bit irrational, meaning we are more likely to make biased decisions.
October 2023. The Efficient Market Hypothesis (EMH) is an investment theory that states that current stock prices reflect all existing available information, making them fairly valued at any given time.
September 2023. The number of bankruptcy filings is on the rise, and that may be a good thing.
September 2023. A ‘common knowledge’ view I find very interesting is that Japanese interest rates have been so low for so long due to low growth, which has largely been attributed to the country’s demographics.
September 2023. When will the Fed pause? This is the million-dollar question.
Despite higher interest rates and persistent (though falling) inflation, global equity markets continued to err on the side of optimism as consumer spending remained strong and company earnings were better than expected. Global equities returned over 6.5% during the second quarter of the year, albeit for unhedged UK-based investors this was tempered by a stronger Pound meaning returns closer to 3%....
Every crisis has a response. In their effort to prevent it from happening again, policymakers put in safeguards and provide incentives for the next bull market. In these policies, we should, usually, seek the seeds of the next crisis. From the biggest potential risks, the Private Equity space is where we would focus.
After the fall of the Soviet Union, the world breathed a profound sigh of relief. Humanity had come close to self-annihilation in 1962, when the US and the Soviet Union threatened to deploy their nuclear arsenal on one another, destroying life on the planet in exchange for control of Cuban airspace.
Global investment risks remain elevated as tight monetary conditions and policy uncertainty cause shocks in several markets. We saw a rally in risk assets during Q2, but this rally was largely concentrated in a few US tech stocks, a rebound after a bad year combined with optimism surrounding AI.
The global economy got a welcome and non-inflationary boost from China’s post-Covid reopening early in the year. However, from this point forward, it is poised to slow down. Credit conditions are set to deteriorate, disposable incomes reduced as inflation remains potent and central banks keep reducing the supply of money.
July 2023. Last month, HSBC announced that it would be moving from its iconic tower in Canary Wharf to a smaller building in the city, very close to our Mazars’ office in fact.
July 2023. The first quarter of 2023 started strong for emerging markets. Globally, investors were excited of the prospect of the Chinese consumer returning to a long period of strict lockdowns.
July 2023. With the popularity of electric vehicles and other cleaner technologies on the rise, the demand for oil is set to slow over the next decade.
June 2023. The last nine months have seen two widely publicised crises with something in common. The first, the liability driven investment (LDI) crisis which saw the Bank of England intervene to prevent the collapse of pension funds, the second the collapse of Silicon Valley Bank, which was forced to sell down its investments at a loss to meet deposit withdrawals.
June 2023. As markets celebrate Congress’ decision not to self-immolate, investors reflect on how low the bar for rational behaviour by policymakers is, and whether risk premiums echo the present political and geopolitical tectonic shifts.
June 2023. It all started with an energy crisis. Swathes of European factories were forced to limit production as rampant energy costs hampered their business models. But is this a one-off or has this initiated a long-term industry exodus as manufacturing industries in foreign nations become increasingly competitive?
June 2023. Post-Brexit London has lost some of its curb appeal, with many now preferring the likes of Amsterdam and Paris to base their headquarters. However, recently a large bulk of asset transfers has been completed. At the same time, relations between the UK and the EU seem to be improving, creating an easier path for post-Brexit financial services exports.
May 2023. Crises in financial markets are mostly unpredictable and the result of a misunderstanding of risks and genuine mistakes. We could however be headed for a major crisis which is completely avoidable, save for the deep political polarisation in the US and some of the arcane laws in place regarding how much debt the country has outstanding.
May 2023. The 60/40 portfolio consists of 60% equities and 40% bonds. Equities provide capital appreciation but with volatility. Bonds provide lower, predictable returns and are less volatile. In fact, the equity/bond split is then adjusted for individuals’ risk tolerance, but the term 60/40 portfolio is a catch-all which represents all diversified portfolios. This bond equity split has traditionally...
May 2023. A potential US recession has been a topic of heated debate among investors. But exactly which recession indicators are the most reliable?
May 2023. In Pirates of the Caribbean, Jack Sparrow often trades in, or searches for, treasure in the form of pieces of eight. Pieces of eight were introduced in popular pirate lore by Robert Lewis Stevenson’s Treasure Island.
May 2023. The world of finance has three traditional asset classes: Bonds, stocks and commodities. The market for the latter has always been the smallest, as they usually trade in forward or futures contracts.
May 2023. Rising UK inflation is a result of global supply chain disruptions. However, as supply pressures and price hikes ease elsewhere, UK numbers still seem stubbornly resilient. One of the reasons is the labour market, which is much tighter in the UK. The question is: When will UK inflation drop?
May 2023. For the fourth year in a row, we are faced with great uncertainty and a wide variety of outcomes.
May 2023. To date, our theme for 2023 is that the world is a volatile and unpredictable place. This could have been our theme every year since 2006 and we would have still hit the mark. But this is not garden-variety volatility. Underlying everything are two themes. A geopolitical shift away from the post-soviet unipolar world, and the war against all that is not sustainable.
May 2023. Despite the potential for new technologies to disrupt industries and livelihoods, they could also be the key to unlocking the productivity growth we need to boost income and living standards.
May 2023. The Apple Card, a joint venture between Apple and Goldman Sachs, now offers a savings account delivering an attractive interest rate of 4.15%. But is this the beginning of a revolution in banking, or simply an ill-fated attempt by Apple to diversify its revenue base?
May 2023. Five Eastern European nations recently announced bans on grain and other food imports from Ukraine, citing their desire to protect their respective agricultural sectors.
April 2023. Smaller banks are still feeling the pressure, while bigger banks feel safer. The alarm bells are off, for now. But investors should not be relaxed about building risks.
April 2023. Chinese economic data, for the first couple of months of the year, suggests that GDP growth will exceed 5% this year. But this time seems to be different.
April 2023. Private assets appear to offer less volatility than those publicly traded and valuations in this space have been much more resilient than listed equities. However, no asset can escape its fate forever and recent liquidity issues may bring about a reckoning for private assets.
April 2023. The global rise in inflation began in mid-2021 as economies re-opened following the COVID pandemic. Damaged supply chains were the prime issue, as well as China’s continued zero-COVID policy since the country’s cheap exports had been a prime deflationary factor in recent decades. Inflation was turbo-charged in February last year as Russia’s invasion of Ukraine caused energy prices to skyrocket.
April 2023. Commercial Real Estate (CRE) – an illiquid asset class that rarely sees the spotlight. Yet, the well-publicised failures of Silicon Valley Bank (SVB) and Credit Suisse have reignited investor concerns around balance sheets and, consequently, the loans made by banks to owners of commercial property to keep their businesses operating smoothly.
April 2023. Even with persistent inflation and lingering economic fears, U.S. consumers (in particular) have surprised many with their desire to spend. This unexpected consumer resilience is helping to push the chance of an economic slowdown further away.
April 2023. March was a huge month for developments in artificial intelligence (AI). GPT-4’s impressive performance on coding tasks and standardized exams raised many questions about what jobs would be automated. In finance at least, we believe that humans plus AI will beat AI.
Positivity in equity markets continued during the first quarter of 2023, with global equities returning over 7.5%. As was the case in the final quarter of 2022, a stronger Pound meant that for unhedged Sterling based investors’ returns were somewhat diluted, albeit still significantly positive.
The last quarter of the year saw some relief for investors who had been hit from all sides throughout 2022 as markets rallied on the belief that the economy was perhaps showing enough signs of stress to persuade central banks to consider slowing and then stopping interest rate rises. Central banks, for their part, remain consistent in their messaging that markets may be overoptimistic.
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