deVere Group - International Investment Strategy

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 is the deVere Group's International Strategist. His role is to help the Group's clients to better understand the economic and political influences that drive capital markets, which in turn drive investor returns.

Tom, formerly an Executive Director at JP Morgan Asset Management, has 25 years experience in the financial sector.

He is currently a visiting lecturer in the department of political economy at King’s College, London.

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Tom Elliott
Recent Broadcasts
Video
July 06, 2017

Stock market investors should not fear the new tone coming from central banks
Tom Elliott

With inflation at or below central banks target rates in all the major economies except the U.K, the current market fear of a coordinated tightening of global monetary policy appears unwarranted. More credible risks to stock markets include the risk of a credit crunch in China, some over valued risk assets such as US tech falling out of fashion

Older posts

U.K politics: chaotic, but potentially good for investors
In view of the chaotic state of the U.K government following last week's general election, investors might be surprised at how little sterling has fallen and U.K stock markets have been affected. This may reflect the fact that stronger economic growth is forecasted under a soft Brexit, which now appears possible, and with an easing of fiscal austerity.
June 13, 2017

Should we be concerned about low volatility in capital markets?
Tom Elliott explains why fundamentals are still good for stocks, and why any market correction over the coming months is likely to be temporary.
May 18, 2017

Article 50 and the UK Stock Market
The forthcoming Brexit negotiations will focus on the exit terms and the status of nationals working abroad. In all likelihood a new replacement U.K / E.U trade agreement will not be in place by end of March 2019, leaving the U.K to conduct its trade with the E.U under WTO tariffs. As this becomes apparent, shares in domestic-focused companies may suffer relative to those of FTSE100 multinationals.
March 24, 2017

Outlook for Capital Markets in 2017
Tom Elliott identifies Donald Trump's fiscal stimulus of the U.S economy as potentially the single most important economic theme in 2017, with implications for global capital markets.
January 04, 2017

Wall Street under President Trump - a boom and bust scenario?
Tom Elliott asks if lower taxes and increased infrastructure, together with curbs on immigration and tariffs on imports, might cause a short boom in domestic demand and corporate earnings. As inflation gathers pace and interest rates rise, markets may then panic.
December 07, 2016

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Blog
July 18, 2017

Investment Outlook
Tom Elliott

Near-term market sentiment: Confident, with the S&P500 holding on to last week’s new highs thanks in part to yesterday’s release of stronger than expected China second quarter GDP data.

Janet Yellen’s testimony to Congress last week demonstrated a more dovish view on future interest rates than we have seen of late, which was justified later when U.S inflation data showed CPI stuck at 1.7% y/y. Consequently the interest rate futures market is now suggesting no further hike in Fed rates this year. Therefore, whichever risk free rate we use as investors will remain low and relatively unattractive compared to the expected total returns from stock market investments and other risk assets. As I have said before, any market correction over the coming months is likely to be met with investor buying and a swift recovery thanks to three on-going supportive themes: rising corporate earnings growth, a reduction of geopolitical risk, and continuing very loose monetary policy from central banks.

Sterling appears trapped between a falling dollar and stronger euro, as explained below. This situation likely to persist over the coming months. Weaker U.K economic data will reduce the likelihood of rate hikes from the Bank of England, perhaps putting downward pressure on the currency, but the ever-softening position of the U.K government on Brexit negotiations is supportive (eg, a growing acceptance of the need for a transitional arrangement to be in place from April 2019).

Dollar/ Sterling. The GBP fell after the U.K election result, but has since been stronger than expected against the USD, currently trading at $1.310 (on the 18th July). This is a little more than a cent and a half than before the U.K election in early June. There are several political themes helping sterling. First, the U.K election reduces the risk of a hard Brexit because it has delivered a much reduced majority for the ruling Conservative party. The majority of MPs are thought to be ‘remainers’, who now have the ability to vote down Brexit-related legislation in the House of Commons. Furthermore, the risk of Scottish independence is now reduced, after the Conservative party won 12 seats in Scotland (from one in the 2015 election) after running a strong campaign against a second Scottish independence referendum. Currency traders, gilt investors and other investors in sterling assets are not by definition pro-E.U and pro-Union, but they dislike any political and economic disruption that carries risk.

Second, having peaked at a multi-year high on 28th December, the dollar has been steadily falling this year on a trade weighted basis and is now down 5.5% since that peak. This reflects lower U.S economic growth forecasts, as it appears that Trump may struggle to get both his supply side measures through Congress (eg, tax simplification and business de-regulation), and his Keynesian fiscal ‘pump priming’ measures of tax cuts and infrastructure spending. GDP rates of 3%-4% over the coming years now look unrealistic, and with that inflation and Fed rate hike expectations have been reduced. Indeed, Yellen last week pointed out that ‘normal’ interest rates in the future may be only a percentage point, or less, than the Fed’s current target rate of between 1% and 1.25%.

Euro/ Sterling. The GBP has fared worse against the euro, which is currently at EUR 1.137, a euro cent lower than before the U.K election. This reflects a run of relatively strong euro zone economic news, efforts by the ECB to convince the markets that its bond purchase program may be curtailed in light of rising inflation, and a sense that French President Macron will help promote fiscal union within the euro zone, which is needed for the long term future of the single currency. The ECB’s nominal effective exchange rate is up 4.0% since 28th December.

A balanced fund for the long term. The chart below shows a typical long-term balanced portfolio based around 60% global equities and 40% global bonds. Financial history shows this combination to offer good returns relative to risk (ie, volatility). Investors should try to be as diversified as possible, perhaps using the 60/40 model as their guide. Multi-asset funds based on this principle are available, often with different ratios of bonds and equities depending on the level of risk suitable for an investor.

Note that the chart shows neutral weightings for the long-term investor, it does not incorporate the near-term weighting suggestions of the previous paragraph.

Older posts

Investment Outlook
July 03, 2017

Investment Outlook
June 20, 2017

Investment Outlook
June 05, 2017

Investment Outlook
May 22, 2017

Investment Outlook
May 07, 2017

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