Nutmeg investor update – August 2017

Shaun Port

read 2 min

It’s been a busy month for company earnings announcements; we’ve seen gains in both bond and equity markets; and we’re noting some uncertainty as investors think about the end of central bank stimulus measures.

For global equities, July saw the eighth consecutive monthly rise – the best series of gains since 2003 and the fourth longest monthly run since records began in 1970. While this might suggest stock markets should fall from here, history suggests it’s not necessarily bad news: in previous periods of similar consecutive monthly rises, equity markets have continued to climb over the following year. So, there is positive news in global stock markets.

Nutmeg portfolio performance

During July, all fully managed portfolios delivered positive returns ranging from between 0.1% and 1.4%, with mid-risk portfolios returning around 1%.

The FTSE 100 returned 0.9%, Europe and Japan were barely positive, US somewhat better while emerging markets delivered 6% last month. Clearly, emerging markets are delivering good returns for our portfolios.

What changes have you made to portfolios?

In early July, we sold all our holdings in gold, which we had been holding as a degree of protection in all our fully managed portfolios. In place of this classic hedge, we have increased our holdings in US government bonds with a link to inflation, which we think are a better hedge against some of the risks in the market.

We’ve also added to our emerging markets exposure. For example, in our highest risk managed portfolio (10) we hold 14% in emerging market stocks where normally we’d expect to hold about 8% on average.

We’re optimistic about emerging markets because global trade activity is increasing and commodity prices are improving.

Customer question: Although our portfolios remained relatively flat, slightly better over July, there have been some big ups and downs. What’s caused this?

Over the course of this year markets have been relatively calm compared to previous years, but we wouldn’t expect this low volatility to last.

Investors are now starting to think about how next year will look and how central banks will roll back the stimulus measures they’ve put in place since the 2008 financial crisis. For example, how and when will they reduce the volume of government bonds being bought? Naturally, this has unsettled bond markets and, to an extent, equity markets, and resulted in some quite big one-day falls.

Seeing big falls on a specific day is relatively normal and we’d expect to see more of this in the coming months and into next year. This is why you should invest for the long-term and focus on your goals, where short-term market volatility has less of an impact on your investments.

About this update: This update was filmed on 2nd August 2017 and covers figures for the full month of July 2017 unless otherwise stated. Data sources: Bloomberg and Macrobond.

Risk warning: As with all investing your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you get back less than you invest. Past or future performance indicators are not a reliable indicator of future performance.


Shaun Port
Shaun is the chief investment officer at Nutmeg. He has over 25 years’ experience developing and implementing investment strategies for clients ranging from central banks to pension schemes to charities and private individuals. Shaun holds a degree in Mathematical Economics from the University of Birmingham and is a Chartered Alternative Investment Analyst. He can be found tweeting @ShaunPort.

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