06 March 2020
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VAM Funds

Welcome to our weekly newsletter, where the Manager summarises the key market developments over the last seven days.

The Noise

Central Banks around the globe have now responded to turmoil in the markets which emerged last week. The US Federal Reserve and the Bank of Canada cut their main policy rates by half a percentage point as an emergency response to weakness in the markets. The European Central Bank, the Bank of England and the Bank of Japan are all actively considering their options, demonstrating a globally coordinated response to the economic impact of the virus.

Governments are supporting their Central Banks as they too take actions to protect their economies. US Congress agreed to spend $7.7bn to combat the virus, the IMF pledged $50bn of emergency financing and the World Bank announced up to $12bn in emergency support. Italy, Australia and Indonesia have all committed packages specifically designed to combat the effects of the virus.

The market continues to be rocked by the Coronavirus with most global equity markets down for the week. The US market rallied briefly with Joe Biden now looking very likely to be nominated as the Democratic candidate, meaning the November elections will likely see either Biden or Trump elected President, both well-liked by investors and taking the more socialist outcomes off the table. However, these gains were overridden by the elevated volatility which continues to pervade markets.

The Numbers

GBP Performance to 05/03/20
1 Week
YTD
Absolute Level
Equity GBP Total Return (MSCI)

UK (MSCI UK)

-1.20%

-10.30%

6007

Europe (MSCI Europe)

-0.70%

-6.30%

6563

US (MSCI USA)

1.10%

-3.50%

8201

Japan (MSCI Japan)

-0.60%

-6.70%

6202

Emerging Markets (MSCI Emerging)

0.50%

-4.30%

493

Fixed Income GBP Total Return

UK Government (Barclays Sterling Gilts Index)

1.40%

6.50%

311

Investment Grade Hedged (Barclays Global Aggregate Corporate Bond Index)

1.00%

3.60%

314

High Yield Bonds Hedged (Barclays Global High Yield Index)

0.10%

-0.60%

527

GBP Performance to 05/03/20
1 Week
YTD
Absolute Level
Currency Moves

GBP vs USD

0.50%

-2.30%

1.30

GBP vs EUR

-1.60%

-2.50%

1.15

GBP vs JPY

-2.60%

-4.50%

137

Commodities GBP Return

Gold (in £)

1.10%

12.80%

1289

Oil (in $)

-2.90%

-22.10%

45

Source: Bloomberg, data as at 05/03/2020

The Nuance

This week, governments and Central Banks alike finally woke up to the problems in their economies, alerted by panic in markets last week. It might feel as if it’s about time that governments opened their eyes, but it’s still good news to see action being taken around the globe. The coordinated response from governments addressing these issues with all the tools at their disposal, both monetary and fiscal, can only apply upward pressure to asset prices. Indeed, if governments’ economic and public health precautions are successful at containing both the geographic spread and financial impact of the virus, this might be a good buying opportunity for investors.

It’s still too early to tell what the full impact of the Coronavirus might be and the end is certainly not yet in sight. As such, it remains more important than ever to be invested in companies with strong balance sheets given the significant uncertainty of what lies ahead. However, from an investor’s perspective, all is not doom and gloom. The volatility in markets can be used to pick up strong, good quality businesses when their prices fall along with the wider market. The overarching of the Manager priority continues to be the protection of client assets, but alongside these efforts, it is actively seeking good opportunities to rotate its portfolios towards these durable but attractively priced assets.

Quote of the week

“Everyone decided against establishing traffic rules when it came to vehicles on sacred sites… They didn’t listen to us and this is the result.”

Pedro Edmunds Paoa, Mayor of Easter Island.

Our quote this week, hopefully, offers some respite from Coronavirus-related news. Easter Island’s Wikipedia page states: “Easter Island is most famous for its nearly 1,000 extant monumental statues, called moai, created by the early Rapa Nui people.” Well the source of the island’s fame just took a 0.1% hit. A Chilean man who lives on the island in Polynesia was arrested this week and has been charged with “incalculable damage” after driving his pickup truck into one of the moai statues. The Mayor of the island has cited the incident as evidence that vehicle restrictions need to be enforced around the island’s archaeological sites. He said the island’s population had risen from 8,000 to 12,000 since 2012, adding that it also hosted 12,000 tourists a month. “They didn’t listen to us and this is the result” the Mayor said.

Source: Sanlam Private Wealth

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Sanlam Private Wealth is a trading name of Sanlam Private Investments (UK) Ltd.

Past performance is not a reliable indicator of future returns, investing involves risk and the value of investments, and the income from them, may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.

The information and opinion contained in this market view should not be treated as a forecast, research or advice to buy or sell any particular investment or to adopt any investment strategy. Any views expressed are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness by Sanlam. Any expressions of opinion are subject to change without notice.

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