Strong week amid weak conditions

08 November 2019

The Noise

  • The Dow and the S&P broke through to new highs as this week thanks to a triple whammy of Fed rate cuts, the potential for a trade deal and tariff rollback between the US and China, and the majority of companies beating on expectations as we come to the end of reporting season. Gains were broad based across sectors, markets and geographies, suggesting a widespread uptick in positive sentiment.

  • “Safe haven” assets such as gold and government bonds dipped accordingly, as the flight to safety that we’ve seen over the past few months started to ease and investors felt more comfortable putting some risk back on the table.

  • The trade negotiations with China are central to the market’s renewed sense of optimism, particularly given that tariffs had already begun to eat into world trade volumes. The International Monetary Fund (IMF) even announced that were a trade deal to be struck, it might lead to its officials revising forecasts upwards for global growth next year.


The Numbers



The Nuance


Has the Santa Rally come early this year? It’s traditional in November to complain about how shops are pedalling their Christmas wares too early, but usually that massive boost in consumption gives us a stock price rise in the last five trading days in December, and we’re barely past Guy Fawkes Night.

Now we don’t want to dampen the festive spirit, and it is beyond doubt that companies beating on expectations and China getting closer to a trade deal with US are both very positive developments. But the fact is it still remains to be seen whether this uptick in positivity has a long term structural basis, or whether it is simply short term noise. Either way our investment strategy will remain unchanged, because while we do make tactical shifts according to macroeconomic conditions, the investments we make are based on their ability to produce a return in all manner of economic regimes. If we were to see an extraordinary rally in equities then we would remain cautious, because simply put there is not a strong enough case being made by the economic fundamentals to warrant serious price rises in stocks yet.

But it’s not all bah humbug from this corner, and it’s been particularly pleasing to see just how well companies have been performing despite the weakened economic conditions. It only goes to back up our long-held view that good companies are capable of growing, performing and developing innovative products in any environment. These are the kinds of investments that compound your returns over the long term.

Quote of the week


“She had survived on boiled sweets, which she had kept in a tiny pouch. By the time we found her, she said she had one left” Captain Giorgos Marietakis, Hellenic coastguard

45 year old Kulisha Stein had been drifting in a dinghy in the Aegean Sea for 37 hours this week, when she was finally rescued by the coastguard, having survived on a mere handful of boiled sweets. It’s not the most unusual diet that stranded sea-farers have lived on in recent years however; last year an Indonesian teenager survived for 49 days at sea by eating raw fish, while fisherman Jose Salvador Alvarenga managed to sustain himself for 440 days by drinking the blood of sea turtles.


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