Nutmeg investor update: May 2019

Shaun Port


4 min read

April was a subdued month in the markets, with company earnings having more impact for investors than economic performance.

How did the markets fare in April?

April felt like a really subdued month; like not much was going on. But if you look at the returns of some markets, generally they were pretty strong. About one third of emerging markets lost money, but overall, emerging markets returned about 2%. In developed markets, there was quite a wide dispersion of returns, ranging from -1% up to +6%. Within the major markets, the laggards were Australia and Hong Kong – returning around 1– and the UK and Japan returned around 2%. 

The stronger performers were France, with almost 5% returns, and Germany and Sweden both returned over 6%. So, we saw particularly strong returns coming from European equities, which is interesting in the context of the European economy still performing quite poorly. 

Outside of equities, bonds had a relatively tough month. Government bonds lost money in the US and in the UK, where they were down by 1.6%, which is quite a significant loss, and global property securities lost almost 1.5%. While, equities had some quite strong returnsoutside of that returns were far less impressive. 

What’s the driving force behind the good returns from developed market equities?

It wasn’t actually economic performance that was driving markets in April. In Germany and South Korea, the picture still looks particularly weak. There was some small improvement in Chinese economic data last month. The US continues to be pretty strong, with 3% growth in the first quarter of this year. So, the US is doing well, but everything else is a bit mixed. 

The main driver of improvement in the market was that company earnings – particularly in the US – were quite strong. If you go back to the end of last year, people were worried that the earnings coming through at the beginning of this year were likely to be very weak, but that hasn’t been the case. Of the companies that have reported so far, about half the top 500 companies, almost 80% have beaten expectations. These strong earnings figures, particularly in the tech sector which has seen all-time highs – except for Google – powered the US market in April. Now, we shouldn’t worry about US stocks being at an all-time high – this is just a feature of what happens when markets are going up. When a market is in an up-phase, you expect to see prices continue to make new all-time highs – so really nothing to worry about. 

How have the markets reacted to the news that Theresa May has been granted an extension to Brexit until 31st October? Have things stabilised a bit since Parliament had its recess?

It’s funny – it feels like such a long time ago now, and that’s exactly the sentiment in the market. Brexit has dropped off the radar for global investors. If you went back a month ago, this was cited as a big risk to financial markets. Whether you were a US investor or a Japanese investor, the prospect of the UK crashing out of the EU without a deal would have been a very big, systemic, financial issue that investors would be concerned about. Now that the exit date has been moved to 31st October, this concern has really come off the radar. 

We believe political tensions will start to rise once again, given the European elections at the end of May, which means more volatility for the pound. But for global investors, I think this has been much less of an issue. The biggest issue is around trade tensions between the US and China. 

Given all that, how did Nutmeg’s fully managed portfolios perform in April?

Our lower risk portfolios returned around 1% – and a lot of that gain came from equities, but given we were quite defensive in our bond holdings, we didn’t really feel that full impact of the sharp fall in prices of UK government bonds. Medium risk portfolios delivered around 1.75% return during the month and the highest risk portfolios returned around 3%. 

The detractors from returns were Japanese emerging market stocks and a lot of the gains came from US stocks, particularly US tech stocks. 

This month’s customer question comes from Phil on Facebook. He asks:

‘To cement your position as a leader in eco-friendly investments, will you be making SRI portfolios the default for new customers?’

I think it’s important to offer choice and that’s why customers can choose between our managed portfolios and our socially responsible managed portfolios. We’ve already seen almost 5,000 socially responsible portfolios set up since November.  

What I would say is that we’ve signed up to the United Nations Principles for Responsible Investing (PRI), one of the few UK wealth managers to do so. As part of that commitment, we are required to embed analysis of environmental, social and governance (ESG) factors into our entire investment process and not just for our socially responsible portfolios. 

We believe that these factors will have an increasing bearing on the future performance of different asset classes. Last year, we saw that an environmental disaster caused one of the largest corporate bankruptcies in US history, so these factors will play an increasingly important role in the performance of markets. 

We would expect that most investment companies will start to report on these factors and the criteria in the way that they manage portfolios. Maybe this will be in five years’ time, maybe longer, but for us, that change is happening now.

About this update: This update was filmed on 1st May 2019 and covers figures for the full month of April 2019 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 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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