24 January 2020
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Welcome to our weekly newsletter, where the Manager summarises the key market developments over the last seven days.

The Noise

As the World Economic Forum was held in Davos this week, trade tensions have risen between the US and the UK. The UK Chancellor, Sajid Javid confirmed plans to introduce a digital services tax which will hit US firms such as Apple, Amazon and Facebook. In response, the US treasury secretary, Steve Mnuchin has threatened new tariffs on UK carmakers.

Also at the Forum, President Trump said the US was “in the midst of an economic boom, the likes of which the world has never seen before”. He denounced climate activists as “perennial prophets of doom”, claiming it to be the time for optimism and promising that America would defend its economy.

A strain of the respiratory illness, coronavirus, has spread into new parts of Asia with the first case reported in the US on Tuesday. As the epidemic has forced authorities in the Chinese city of Wuhan to close public transport networks, shares in mainland China and Hong Kong have fallen slightly, whilst China’s currency has weakened against the Dollar.

The Numbers

GBP Performance to 23/01/20
1 Week
YTD
Absolute Level
Equity GBP Total Return (MSCI)

UK (MSCI UK)

-1.20%

-0.20%

6774

Europe (MSCI Europe)

-1.20%

0.60%

7140

US (MSCI USA)

0.00%

4.40%

8990

Japan (MSCI Japan)

0.40%

1.30%

6826

Emerging Markets (MSCI Emerging)

-1.90%

1.90%

531

Fixed Income GBP Total Return

UK Government (Barclays Sterling Gilts Index)

1.10%

3.30%

302

Investment Grade Hedged (Barclays Global Aggregate Corporate Bond Index)

0.60%

1.30%

307

High Yield Bonds Hedged (Barclays Global High Yield Index)

-0.20%

0.60%

533

GBP Performance to 23/01/20
1 Week
YTD
Absolute Level
Currency Moves

GBP vs USD

0.30%

-1.00%

1.31

GBP vs EUR

1.10%

0.40%

1.19

GBP vs JPY

-0.30%

-0.30%

144

Commodities GBP Return

Gold (in £)

0.30%

4.00%

1188

Oil (in $)

-5.30%

-7.50%

56

Source: Bloomberg, data as at 23/01/20

The Nuance

It continues to be an encouraging start to the year with equities and bonds posting positive returns so far in 2020. These optimistic market sentiments persist despite background noise which has evolved this week to include concerns over the coronavirus from China. Longer-term positive trends such as the ease of US-China trade tensions underlie this shorter-term news – the Manager looks past this volatility to focus on carefully selected businesses with sustainable competitive advantages. As long-term investors pursuing high quality companies, the Manager keeps a level headed focus on its consistent investment approach. Whilst the noise might change, its position remains the same – the Manager continues to look for pockets of value in equity markets and invest in companies with solid balance sheets that are able to grow over time. Its investment approach is not focused on second-guessing noise such as the coronavirus outbreak; instead the Manager concentrates on quality businesses which can prosper no matter what surprises may be thrown at them.

Quote of the week

“This isn’t something we usually forecast, but don’t be surprised if you see iguanas falling from trees tonight.”

The National Weather Service in Miami.

What do iguanas and rollercoasters have in common? Neither were built for the cold. Frozen iguanas have been falling from trees in Florida as unseasonably cold weather has caused them to become immobile. The cold snap has also forced Universal Orlando Florida and a Disney World water park to close down as temperatures fall well below the seasonal average. When temperatures drop below 4C (40F), the tree-inhabiting lizards lose their ability to hold on to the tree branches. More often than not, the iguanas survive the fall and reanimate as the weather warms up, presumably to scurry back up to the treetops. Numerous videos have emerged online of Miami residents moving the cold-blooded lizards into the sun, causing them to warm back up and scamper off.

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.

Disclaimer: VAM Cautious, Balanced and Growth Funds are compartments of VAM Managed Funds (Lux).
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