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
September 16, 2016

Market jitters over central banks' supposed change of policy
Tom Elliott

Central banks do not have a Plan B to re-flate the global economy. Loose monetary policy will continue despite concerns over its effectiveness

Older posts

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

Political populism and investing
Tom Elliott explains why investors should think twice before voting for parties that want to limit the movement of people and goods around Europe and the world
June 02, 2016

Sell in May and come back on St Ledger's Day?
Tom Elliott asks if we should avoid stock markets this summer and finds it a difficult case to make.
April 28, 2016

Sterling and Brexit
Tom Elliott looks into why sterling has lost value as fear of Brexit rises and US rate hikes later this year are once again being priced into the market. With one of the largest current account deficits in the developed world, the UK may have to see much higher interest rates from the Bank of England to support sterling, or accept continuing weakness until the deficit clears itself.
March 03, 2016

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Blog
September 12, 2016

Riding the Camel - investors sense change in central bank policy
Tom Elliott

Current racing conditions: soft. Q3 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, positive on gold. Longer term outlook is to be pro-risk assets.

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This week: Why do investors sense a change in central bank policies? Apple’s Irish tax bill: Brussels at its best, or at its worst? Brexit remains as clear as mud

 

Did last week’s successful sales by Sanofi of France, and Henkel of Germany, of Euro 1.5bn of debt at a negative interest rate, mark the high-water mark for the unorthodox monetary policies that have been pursued by global central banks since 2008? Certainly market sentiment at the end of the week suggests that investors are sensing a global retreat from the policies of ultra-low/negative interest rates and unlimited quantities of asset purchases by central banks, and are bracing themselves for higher government bond yields.

 

However, we have had many moments such as this over the last five years – investors ditching bonds, fearful that a long-term reversal of yields has begun – only for central banks to then reassure investors to the contrary, and bond yields to not only recover by fall to new lows. As long as U.S economic data remains ambiguous, and anaemic in both Japan and the euro zone, I suspect the prospect of a global reversal of the loose monetary policies of recent years is unlikely.

 

September could be a difficult month for both bond and equity investors. Rather disconcertingly, since 1900 this month has been by far the worst performing month of the year for U.S equities. However, investors should not  panic. The macro-economic fundamentals simply do not warrant tighter monetary policy at the moment.

 

Why do investors sense a change in central bank policies?

 

  • At Thursday’s press conference, following the ECB’s decision not to expand the purchase program in line with market expectations, Mario Draghi said he did not want to be premature with any further monetary loosening. This caused investors to fear that Draghi now doubts the efficacy of quantitative easing and negative interest rates, which have not -so far- generated a sustainable recovery in the euro zone, but which have helped push up asset prices.

     

  • This follows disappointment in recent months by investors that the Bank of Japan has not expanded its bond purchase scheme in line with expectations.

     

  • Meanwhile the hawks in the Fed are arguing for a normalisation of U.S interest rates as soon as possible (ie, an increase), citing rising take-home pay and tight labour markets for skilled workers, and fretting that lose monetary policy is giving rise to asset bubbles in the U.S financial sector and in property. They brush aside recent weak manufacturing and service sector data, and August’s weaker than expected payroll data of ten days ago.

     

  • Despite launching a fresh round of quantitative easing in early August, and cutting interest rates by 25bps to 0.25%, Mark Carney of the Bank of England has expressed a desire not to follow the ECB and Japan into negative interest rate territory.

     

  • If central banks are together changing policy, what sort of returns can we expect for global capital markets? Much will depend on the strength of the world’s two largest economies – the U.S and China – and the extent to which they can continue to grow in a harsher monetary environment. If they can, the impact on global stock markets may be transient even as bond yields climb, since it would demonstrate that global growth is not overly-reliant on lose central bank policy. Expect financial stocks, which can increase their spreads as interest rates and bond yields rise, to outperform.

     

  • However, if the U.S and Chinese economies stumble under tighter global monetary conditions, so proving that global growth is addicted to lose central bank monetary policy, the investor’s refuge may be long-dated government bonds – less sensitive to interest rate hikes that will raise the short end of the yield curve, and more sensitive to long term inflation expectations that will be weaker and so contribute to lower longer term yields.

     

     

Apple’s Irish tax bill: Brussels at its best, or at its worst?

 

  • Is Apple’s Euro 13bn tax bill to the Irish government an example of the E.U enforcing limits on state aid, and so fulfilling its obligation to ensure a level playing field across the single market, or has the E.U entered an area that is deemed an area of national sovereignty, which is tax? Whatever the rights and wrongs of this multi-faceted case, it comes at a bad time for the E.U when populist political parties across Europe are looking for fresh arguments to justify their accusations of a meddling Brussels elite.

     

  • To Apple, its allies in the US Treasury and in the Irish government, the E.U has crossed a red line by ordering Apple to repay the Euro 13 bn that it says should have been paid in tax to the Irish government since the early 1990s. What tax deal a sovereign state arranges with a company operating within its borders is its business, they say. And if the Irish government chose to forgo what has amounted to an estimated Euro Euro 220,000 annually for ever job Apple has created in Ireland, so be it. This is what sovereignty over tax issues is about – using tax code creatively, in order to win investment and to create jobs.

 

  • The E.U sees it differently, arguing not that it is infringing on tax sovereignty but enforcing state aid regulations which are definitely within its authority. What, it argues, is the difference between the Irish government offering a direct grant of Euro 220,000 each year for every job Apple creates in Ireland, which would most certainly be considered illegal state aid, and using the tax system to achieve the same result? And how can the Irish government claim that a state aid deal for Apple did not exist when the company’s tax payments have, as a result, been substantially lower than the country’s 12.5% corporation tax.

     

  • Pro-E.U politicians across the continent can take pride in the willingness of Brussels to take on a member state and one of the world’s largest companies, in order to enforce competition rules. But in the current political environment across Europe, it may be the anti-E.U politicians who gain most from this spat as they cry foul over interfering Brussels bureaucrats exceeding their authority in their effort to create an E.U super-state.

     

     

Brexit remains as clear as mud

 

  • The U.K government’s policy on Brexit remains unclear, and one suspects is still a long way from being worked out. Prime Minister Theresa May slapped down her Minister for Brexit, David Davies, last week for telling the House of Commons that Brexit means that the country will probably have to leave the E.U’s single market.

     

  • This suggests that May believes that one option open to the U.K involves remaining within the single market.

     

  • This is jaw-dropping. Since the single market lies at the heart of what the E.U is about, surely that means we don’t actually leave the E.U? And if we remain in the single market, how can we strike trade deals with Australia and the other countries, given that membership of the single market by definition means staying within the E.U’s system of tariffs on third party goods?

     

     

 

Older posts

Riding the camel 1st August 2016
August 01, 2016

Riding the Camel - Brexit edition
Riding the Camel by Tom Elliott // Brexit edition A look at the politics, economics and investment implications of today’s vote by the U.K to leave the E.U 24 June 2016 Tom Elliott
June 24, 2016

Riding the camel - Fed Rate Hike
Current racing conditions: moderate. Q2 asset allocation preferences (unhedged US dollar-based, updated at start of quarter): neutral equities vs. fixed income relative to benchmark. Within equities, favouring a low volatility/ high dividend strategy and a small overweight in Canada. Within fixed income, neutral. Longer term outlook is to be pro-risk assets.
June 05, 2016

Riding the Camel - Dollar and US Interest Rates
Current racing conditions: remaining soft. Q2 asset allocation preferences (unhedged US dollar-based, updated at start of quarter): neutral equities vs. fixed income relative to benchmark. Within equities, favouring a low volatility/ high dividend strategy and a small overweight in Canada. Within fixed income, neutral. Longer term outlook is to be pro-risk assets.
May 08, 2016

Riding the camel - Odd happenings in the bond market
Current racing conditions: soft. Q2 asset allocation preferences (unhedged US dollar-based, updated at start of quarter): neutral equities vs. fixed income relative to benchmark. Within equities, favouring a low volatility/ high dividend strategy and a small overweight in Canada. Within fixed income, neutral. Longer term outlook is to be pro-risk assets.
April 21, 2016

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