With the markets still waiting for the Trump administration to introduce the promised pro-business initiatives – and political uncertainty kicking off in Europe ahead of a few big elections – most equity markets saw small losses in January.
At the end of last year the markets were quite euphoric, looking forward to lots of ‘business friendly’ initiatives to come from the new Trump administration. However, these initiatives haven’t yet materialised. While we have seen a range of executive orders from Trump over the past few weeks, none of them have given the markets much to cheer about.
Not surprisingly, global markets in general have been soft and we’ve seen losses in some assets: equities have been flat in the UK and down in Europe. Meanwhile, safe assets like gold have been doing well, with about a 5% return.
How have Nutmeg managed portfolios performed?
As to be expected with the prevailing market conditions, we’ve seen modest losses of up to 0.5% across our managed portfolios over the past month.
It’s a big year for European elections
With the French elections coming up in April/May, political risk is high on the agenda across Europe. Although we’re not expecting a market-unfriendly result in France, risk is rising because of the political uncertainty. This risk is being reflected in stock markets and the European bond markets.
We’re keeping a close eye on this activity, however we hold relatively little in European equities and we don’t expect this risk to impact the broader portfolios outside of these equities.
What changes are you making to portfolios?
As you may remember, in February last year — primarily due to Brexit risk but also because we felt they were overvalued — we sold our holdings in UK small-to-mid-sized companies. Now, given the reasonably positive outlook for the UK economy, we’re feeling more optimistic about these companies and we’ve started to invest in them again.
Following the strong performance of US equities since the US election, we’ve taken the opportunity to take profits from these holdings and increase our exposure to emerging markets, given an improving economic outlook across developing economies.
About this update: this update was filmed on Tuesday 8 February 2017 and figures cover the entire month of January 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 may get back less than you invest. Past or future performance indicators are not a reliable indicator of future performance.
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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.Other posts by Shaun Port
