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.

Twitter
Video
December 07, 2016

Wall Street under President Trump - a boom and bust scenario?
Tom Elliott

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.

Older posts

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

Wither Sterling?
The U.K government's option to chose a 'hard' Brexit will almost certainly lead to the U.K leaving the single market and -if it wants to strike its own trade deals with Australia etc. - the E.U's free trade area. Investors are nervous that the economic disruption will slow growth, and lead to an unwillingness of foreigners to fund the $162bn current account deficit. Goldman Sacs forecast a further 5% fall on trade weighted basis for sterling over the next three months.
October 07, 2016

Market jitters over central banks' supposed change of policy
Central banks do not have a Plan B to re-flate the global economy. Loose monetary policy will continue despite concerns over its effectiveness
September 16, 2016

Will market volatility return in September?
Tom Elliott looks at key central bank meetings this month, which may move capital markets and trigger an end to the summer's placid market conditions
September 07, 2016

The politics of Brexit will determine investor options
Tom Elliott discusses why negotiations over EU immigration will be key to any future recovery or downward luch in sterling and UK equities
June 30, 2016

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Blog
December 08, 2016

Riding the Camel 5 December 2016
Tom Elliott

Current racing conditions: unreliably firm. Prepare for a boom, and possible bust, in the U.S economy with a strong dollar and tighter American and global monetary conditions. Suggested portfolio weightings over the next eighteen month for a diversified multi-asset portfolio: 1) Underweight fixed income relative to equities 2) In equities, overweight developed world equities versus emerging markets with a bias towards small in US equity exposure 3) In fixed income, a short duration bias.

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This week: Renzi’s failure will affect the E.U. The strong dollar – a circular argument from the bears? Brexit confusion continues. OPEC deal.

 

Renzi’s failure will affect the E.U.

 

  • The Italian prime minister Matteo Renzi has resigned following yesterday’s Italian referendum result. His proposal to alter the constitution, and the relationship between the upper and lower houses of parliament, were designed to make Italy easier to govern. The failure of his reform proposal is of minor importance: Italy does not suffer from a lack of good laws, but from an inability to enforce them.

     

  • But without Renzi at the helm the E.U has lost one of the few heads of state with a positive vision of how the community can move forward, while populist parties in so many member countries call for its end. It was Renzi who declared that he did not care if France carried a larger budget deficit this year, than allowed by E.U rules, if it meant that Marine le Pen (head of the Front National) was prevented from becoming President of France. Germany’s Angela Merkel now carries an extraordinary weight, perhaps the only remaining senior E.U leader capable of holding the E.U together through the coming years.

     

  • Meanwhile the Italian banking rumbles on, now harder to solve since Renzi will no longer be around to argue the case for a state bail-out (now illegal under E.U rules).

 

 

The strong dollar – a circular argument from the bears?

 

  • There is a good bullish case for investing in the U.S, and global developed, stock markets. Last week saw Q3 GDP upgraded to 3.2% at an annualised rate, while data from the housing market and November payrolls continued to support the case that President Obama is leaving office with the American economy in good health. A rate hike from the Fed this month is an almost certainty.

     

  • Add to this the fiscal reflation proposed by Trump, and we can expect demand to continue to grow, boosting domestic and global growth, and helping to lift the European and Japanese exports. A strong dollar/ weak euro and yen, as the Fed raises interest rates to curb inflationary pressures, will further reinforce the global nature of so called ‘Trumpflation’.

     

  • The bears point out that long term economic growth is dependent on just two things: growing the labour force and increasing the productivity of the labour force. Fiscal and monetary stimuli can only ever offer temporary solutions to weak demand, before supply constraints catch up and prices start to rise. Since Trump wants to curb migration, that will mean slower long term economic growth than would otherwise be the case once you look through the temporary uplift given by a fiscal shock.

     

  • One can agree with the bears, but still make a case for equities as the fiscal stimulus takes hold. In the U.S, the small cap Russell 2000, the NASDAQ, the S&P 500 and the Dow Jones have all recently made new all-. Momentum, and a pick up in corporate earnings, is on their side. The trick will be knowing when to go underweight and switch into bonds.

     

  • A more immediate worry is perhaps that a rising dollar will tighten domestic U.S monetary conditions to such an extent that it will 1) off-set some of the domestic impact of a looser fiscal policy by the Treasury, 2) create mayhem in emerging markets, where there is an estimated $9 trillion worth of outstanding dollar-denominated debt that is becoming rapidly more expensive to service and repay in local currency terms.

     

  • The stronger dollar is being driven by higher Treasury yields, particularly on long dated paper. The 10-year Treasury now offers a yield of 2.4%, from 1.4% in June, on anticipation of stronger economic growth in the U.S and higher interest rates from the Fed.

     

  • This worry may deflate a Trump bubble prematurely. But it appears to be a slightly circular argument. Since a stronger dollar will reduce imported prices, and curb export growth, it should delay the need for higher Fed interest rates and the bond market may be over-reacting. If so, the recent strength of the dollar may be self-correcting and as analysts price in weaker U.S inflation and export growth, Treasury yields stabilise or even fall.

     

Brexit confusion continues

 

  • Sterling has rallied in recent weeks, closing last week at $1.27 as Prime Minister Theresa May’s talk of a hard Brexit appears to be contradicted by the sheer range of possible types of Brexit that are still being considered. A win for the pro-E.U Liberal Democrat party in a bi-election, reducing the government’s majority in Parliament, has added to the sense that the high-tide of Hard Brexit is over.

     

  • Last week a photograph of a minister’s notes, made at a cabinet meeting to discuss Brexit, revealed the words ‘have cake and eat it’ in reference with the U.K government’s negotiations with the E.U. Taken with comments made by pro-Brexit government figures, this appears to mean leaving the E.U while retaining access to the single market and ensuring ease of access for service sector companies, remaining in the common tariff area while being able to make separate trade deals with other countries, all while controlling the numbers of E.U citizens working in the country. These echo the Leave campaign’s promises during the campaign, despite the persistent reminder from Angela Merkel, Francois Holland and other E.U leaders that freedom of movement of labour is non-negotiable. It seems Theresa May’s government is betting that it is.

     

  • More specifically, the note suggested that ministers are still mulling over a Norway-type arrangement with the E.U. Norway pays into the E.U budget and is a member of the single market, but only for manufactured products (ie, not agriculture). This was confirmed when Brexit minister David Davies confirmed that Britain may be willing to pay into the E.U budget in return for retaining access to the single market.

     

  • The mayor of London, meanwhile, is pushing for a London-only visa scheme to allow E.U workers un-feted access to the capital’s labour market. The National Farmers Union (NFU) last week called on the government for a similar scheme for agricultural labourers, after seeing a sharp downturn in the number of eastern European migrants willing to pick winter crops.

     

  • The government has given itself until the end of March 2017 to decide what it wants from the Brexit negotiations, which is when it will formerly trigger the Article 50 leaving process.

 

OPEC deal

 

  • On Wednesday OPEC agreed to reduce oil production for the first time since Saudi Arabia began pumping out as much as it could two and a half years ago, in an effort to destroy the American shale industry. The agreement was reached with the help of non-OPEC Russia, which was always known to favour a deal and which in turn brought Iran to the table. Saudi and other Gulf countries will bear most of the output cutbacks.

 

  • Many oil analysts are sceptical about the deal, given that it depends on many non-OPEC countries cutting back production, and given OPEC’s own poor track record on compliance. However Brent closed on Friday up 15% on the week to $54.22, the highest since August 2015.

     

  • Oil stocks had a strong week, benefiting not only from the OPEC deal but from expectations that Trump and a willing Congress will loosen environmental and other regulations affecting the U.S energy sector.

Older posts

Riding the Camel - The Trumpflation rally
Current racing conditions: unreliably firm. Prepare for a boom, and possible bust, in the U.S economy with a strong dollar and tighter American and global monetary conditions. Suggested portfolio weightings over the next eighteen month for a diversified multi-asset portfolio: 1) Underweight fixed income relative to equities 2) In equities, overweight developed world equities versus emerging markets with a bias towards small in US equity exposure 3) In fixed income, a short duration bias.
November 22, 2016

Riding the Camel 9th November 2016 - Trump Edition
Riding the Camel by Tom Elliott - Trump Edition A look at how investors should respond to Donald Trump's election victory.
November 09, 2016

Riding the Camel 6th November 2016
Current racing conditions: remaining soft. Q4 asset allocation preferences (unhedged US dollar-based, updated at start of quarter): neutral equities vs. fixed income relative to benchmark. Prefer emerging stock markets to developed. Longer term outlook is to be pro-risk assets.
November 06, 2016

Riding the Camel - Recent market weakness signifies nothing in particular
Current racing conditions: remaining soft. Q4 asset allocation preferences (unhedged US dollar-based, updated at start of quarter): neutral equities vs. fixed income relative to benchmark. Prefer emerging stock markets to developed. Longer term outlook is to be pro-risk assets.
October 24, 2016

Riding the Camel - Sterling falls to $1.25
Current racing conditions: remaining soft. Q4 asset allocation preferences (unhedged US dollar-based, updated at start of quarter): neutral equities vs. fixed income relative to benchmark. Prefer emerging stock markets to developed. Longer term outlook is to be pro-risk assets.
October 09, 2016

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