deVere Group - International Investment Strategy

About Tom Elliott

Tom Elliott is an independent investment strategist, and has been a consultant to the deVere Group since 2013. He uses his 25 years experience in the financial sector to help explain and discuss, with the Group's clients, the economic and political influences that drive capital markets.

Tom is a fan of the core/ satellite approach to investing, whereby the bulk of a portfolio is invested in good quality core multi-asset investments that are held for the long-term, while a small portion of the portfolio is used to take short, tactical positions in the markets.

Tom worked as a strategist on the global multi-asset desk at JP Morgan Asset Management. From 2006 until leaving in 2013 he was head of the UK Guide to the Markets team, which focused on high-level investor communication. He left JP Morgan Asset Management as an Executive Director, after 18 years with the firm.

Tom has an MSc in Economic History from the London School of Economics. He has been a visiting lecturer in the department of political economy at King’s College, London since 2015.

International Investment Strategy

deVere Investment Strategy aims to provide clients with a comprehensive picture of the global economy and regular updates on current stock market and fixed income trends, in order to assist investors in making informed investment decisions. It is headed by Tom Elliott, deVere's International Investment Strategist, who produces regular videos and blogs on a wide range of topical investment issues, and regularly speaks at seminars for clients at deVere offices around the world.

The core-satellite approach to investing has several advantages over buying a multitude of separate, high risk investments. The bulk of the portfolio is handed over to a professional multi asset investor, who is qualified to match expected returns with expected levels of risk. The satellite investments allow the client to try to 'beat' the market with higher risk investments, but total portfolio risk is reduced through setting a limit on the size of the satellite allocation relative to the core.

Note: The information contained in this chart is for general guidance on matters of interest only. The deVere Group disclaims any responsibility for content errors, omissions, or infringing material and disclaims any responsibility associated with relying on the information provided herein.

Tom Elliott

International Investment Strategist
Tom Elliott
Recent Broadcasts
July 24, 2020

Investment Outlook
Tom Elliott

Market sentiment: A little nervous, as investors take profits. July has seen global stock markets continue the rally that began in late March, with continental Europe and Asian markets beginning to look as if they might take over from the U.S as market leaders. But some disappointing news from the U.S on covid-19 infection rates, a recent increase in U.S joblessness, and some renewed lockdowns around the world, has triggered some profit taking in recent days.

However, given the massive fiscal and monetary support from governments and central banks, the lack of alternative places to invest while interest rates lie at record low levels, and the likelihood of a strong rebound in corporate earnings over the second half of 2020, any bouts of profit taking are likely to be short lived.

A non-linear and heterogeneous recovery, until we have a vaccine. The underlying global economy is struggling to regain momentum. New lockdowns and social distancing measures mean the recovery in demand is non-linear and heterogeneous, ie it resembles two steps forward and one step back, while different countries, and regions within countries, are recovering at different rates. This should not surprise readers of this note, since we have been favouring a U-shape over a V-shape recovery for some months now, for this very reason.

What has been surprising, and disappointing, is the politicisation of public health control issues -such as lockdowns and the wearing of face masks- in some countries.

Lab results over the last ten days suggest a reasonable expectation of a vaccine coming from Oxford University and/or Moderna (of the U.S) by early next year, from when we can expect the global economic recovery to become linear, heterogeneous and normal economic life for most people to have resumed by next summer.

Corporate earnings. But as demand returns to pre-crisis levels, perhaps first in parts of Asia and Europe -such as China and Germany- we expect to see a relatively sharp recovery in corporate earnings. Cost-cutting measures will result in higher profit margins than before the crisis (this is a normal feature of an recovery in the economic cycle).

We might Asian and European stock markets start to outperform those of the U.S on a consistent basis, given the likelihood of a quicker recovery in corporate earnings in cyclical sectors, and cheaper valuations.

A long tail of U.S stocks to continue to underperform tech and healthcare? Meanwhile the U.S stock market might see a still greater bifurcation. A handful of large (in terms of market cap) growth-orientated sectors, such as tech and healthcare, that have had a ‘good’ crisis, may continue to benefit from a delayed return to normality in the U.S and to structural changes in global work and leisure habits that the crisis has generated. The NASDAQ may reach new highs over the coming months.

But the wider U.S stock market, which contains a large number of relatively small and economically sensitive sectors, may struggle to sustain investor enthusiasm if renewed lockdowns push a resumption of corporate investment spending, high street shopping, travel and socialising further into the distance. These sectors will need to see covid-19 rates plummet in the U.S. This in turn would require greater compliance with lockdowns, social distancing measures, and mask wearing, in a less politically divisive atmosphere.

How long, for instance, before the U.S restaurant and travel sectors returns to normality?  Probably longer than in Germany, where early adoption of public health measures in a non-political environment- has meant relatively few covid-19 cases, and a near-return to normality in the restaurant sector.

Seasonal volatility. It is often hard to distinguish the reasons for market volatility. But investors should be wary of reading too much into bouts of volatility during the northern hemisphere holiday season, for a very human reason. There tends to be less trading done from mid-July through to early September, as market players head to the beaches. This reduces liquidity in stocks, which in turn can increase market volatility. Admittedly, this year beaches might be replaced by gardening and walks in the local countryside.

Brexit and sterling. Sterling continues to look vulnerable to weakness. A U.S/ U.K trade deal this year now looks unlikely, while there is currently nothing in place to replace the current trading arrangements with the E.U when the U.K leaves them at the end of the year. The U.K economy has been hit worse by covid-19 than most E.U member countries, according to the OECD, which will further weaken sterling.

The Euro, meanwhile, seems to have a fair wind behind it. The recently agreed Euro 750 bn rescue fund has restored some sense of unity amongst the E.U member states (which has been damaged during the current crisis). It may, even, act as the foundation block for something much more ambitious – fiscal union. Covid-19 has been handled relatively well in many continental European countries, and normality is resuming at a faster rate than in the U.K and large parts of the U.S.

Stay well.

Older posts

Investment Outlook
April 24, 2020

Investment Outlook
April 08, 2020

Investment Outlook
March 05, 2020

Investment Outlook
February 19, 2020

Investment Outlook
February 04, 2020

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