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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Video
June 13, 2017

U.K politics: chaotic, but potentially good for investors
Tom Elliott

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.

Older posts

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

US Credit
The U.S non-financial corporate sector currently holds $1.84 trillion of cash against $6.6 trillion of debt. Some believe that debt levels have become excessive, and wonder if this could be where the next financial crisis lurks
October 24, 2016

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Blog
June 20, 2017

Investment Outlook
Tom Elliott

Near-term market sentiment: Confident. The S&P 500 closed last night on a new all-time high, and global stock markets are in confident mood. In the near-term, the weakest link in the chain are perhaps the FAANGs stocks (Facebook, Amazon, Apple, Netflix and Google (aka Alphabet), whose share price wobble last week is a reminder to investors that valuations on risk assets are at historical high levels. But there are three supportive elements to the current rally, and if they can be maintained I suspect that any market correction over the coming months will be swiftly met with investor buying and a swift recovery. These elements are rising corporate earnings growth, a reduction of geopolitical risk, and continuing very loose monetary policy from central banks.

Broad economic and political assumptions for rest of this year:

1)    Global economic data remains robust, supporting corporate earnings growth

Sure, the outlook for the U.S probably isn’t as strong as the Fed maintained last week when it raised rates by 25bp. One senses the policy committee was talking about another country given the weak inflation data, tax receipts and other anecdotal evidence of recent weeks. But the consensus estimate is still for GDP growth this year of 2.2%, compared to 1.6% in 2016, which means continued real year-on-year growth in American corporate earnings is likely. Japan and the euro zone are enjoying solid recoveries, with perhaps mid-teen earnings growth for euro zone regional stock market indices in Q2. All of which helps support stock market valuations.

2)    Geopolitical issues worries of earlier in the year have somewhat dissipated

For investors with U.K assets, the principle variable in respect to Brexit negotiations is sterling. This has fallen since the inconclusive U.K general election a fortnight ago, but many would argue that a loss of three U.S cents (to a current $1.267) is quite modest given the media talk of political chaos in Britain, the possibility of a Marxist in No10 by the year end if another election is called, and the now fashionable talk amongst some senior Conservative politicians about the need to slow the pace of deficit reduction. But sterling is supported by a belief that Prime Minister Theresa May’s political weakness will lead the government to tone down its Brexit demands, opting for a ‘soft Brexit’ (ie, perhaps remaining in the customs union). This, the currency markets belief, will be less damaging for the U.K economy and for sterling than a hard Brexit. We will see.

From the E.U’s perspective, the uncertainties over the future of the organisation that haunted European leaders earlier in the year are now banished. Helped by the pro-E.U President Macron’s convincing win of seats in the Assembly National, and Angela Merkel’s positive -if guarded- response to Macron’s call for greater fiscal unity. Polls across the region report an increase in support for the E.U, it seems that the trauma caused by Brexit, migration from Syria, the half-built euro project, and terrorism can be contained.

While some investors will be disappointed that Trump is struggling to get a unfunded tax cuts and infrastructure spending bills through Congress, other – saner- heads will be relieved. An unwarranted Keynesian boost to the economy, which must surely turn to bust as inflation, interest rates and the dollar all march upwards together, has so far been avoided. This is not to argue against funded (ie, fiscally neutral) tax reform and infrastructure spending, but not to argue for deficit financing when the budget deficit is already 3.5% of GDP. Meanwhile in China, perhaps the Achilles Heel of the global economy given its over-leveraged economy, the renminbi has risen slightly against the dollar this year -against expectations- and this has helped to reduce capital flight and to keep money in the domestic economy.

3)    Central bank policy will remain loose

Just as 2015 and 2016 began with investors bracing themselves for tighter monetary policy from the Fed than was actually delivered, so 2017 looks increasingly likely to follow in the same vein. One further rate hike this year is possible. A second, as hinted by the Fed last week, is improbable unless we see a sharp acceleration in growth and inflation data. Meanwhile the Fed’s cautious approach to reducing its balance sheet (ie, unwinding the quantitative easing policy) suggests it will focus on not disrupting the bond market. The ECB, Bank of Japan and the Bank of England show little inclination towards policy tightening (Regarding the U.K, CPI inflation of 2.9% in May is likely to be followed by a poor number for June, but after that year-on-year price data should fall as the post-Brexit referendum drop in sterling falls out of the data).

Therefore whichever risk free rate we use when making investment decisions (perhaps government bonds, or bank account deposit rates) will remain low and relatively unattractive compared to stock market investments.  

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
June 05, 2017

Investment Outlook
May 22, 2017

Investment Outlook
May 07, 2017

Investment Outlook
A fortnightly look at global financial markets
April 10, 2017

Investment Outlook
Why aren’t more global investors buying Japanese equities? Attractive valuations, rising corporate profits, and an improved global and domestic economic outlook, all favour Japanese equities. Why, then are global investors shunning the asset class? Perhaps they should look again.
March 30, 2017

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