Find out the latest from Fidelity.
1. ‘Bond proxies’: separating fact from fiction
17 February 2017
That assertion was the broad thrust of new analysis from the Resolution Foundation and it reinforced a perception that the young may be losing out to the old.
Podger has almost three decades of investment experience, and has been managing global equity funds for over 25 years.
But Paras Anand, Fidelity’s CIO for European Equities, warns that active share - a measure of how different a fund’s holdings are from its benchmark - should not be the only metric which investors look to when evaluating funds. This is because active share merely reflects a manager’s opportunity to outperform1.
16 February 2017
With a largely confirmed cabinet now in place, business can begin in earnest, though while the president has firepower when it comes to issuing executive orders, his broader powers are more constrained.
15 February 2017
Shares across the world were boosted today - the S&P 500 hit a new record overnight - thanks to remarks by the US Federal Reserve Chair yesterday that interest rates could rise even faster than markets expect.
In times like these, income-hungry investors may want to own high yield bonds.
Robust consumer demand – as reflected in the strong recent performance of the FTSE 250 Index – a weak pound and rising international commodity prices are behind us paying more for our goods and services.
There is a glass half full view of the Trump Presidency which has won the majority of investors’ attention since November. It focuses on infrastructure spending, tax reform and deregulation and it can take the credit for the S&P 500 hitting a series of new highs in the wake of last year’s election.
14 February 2017
Looking back over my tenure, we have experienced these periods before and maintain that you always have to think medium to longer term in investing. We continue to focus on buying great businesses that compound over time; an approach which underpins a strong long-term track record. In 2016, we saw such businesses de-rate which impacted performance. I would remind investors that changes such as demonetisation in India or concerns about remittances of money provide an opportunity in general, although sentiment can have a marked impact on valuation in the short term.
The young have always had to put up with being condescended to by the old. The young are lazy. The young are feckless. The young don’t know they're born. Versions of these have been heard around family dinner tables forever and all over of the world.
Less fuss has been made about the same achievement for the FTSE 250, which has hit another intra-day high this morning.
13 February 2017
With a total of 95 years of investment experience between the four of them, and with each having a different style, the fund is in highly-experienced and well-diversified hands.
10 February 2017
It is perhaps the risks around global trade which are most underappreciated. Markets have largely opted to believe in the Trump trade of higher growth, but they have chosen to ignore the potential of an adverse impact from trade policy. Slower trade growth would hold back global growth, with the disruption from higher tariffs or border taxes derailing trade flows and undermining the basis of many economies altogether.
Disappointing ad sales, management turnover and sluggish user growth weighed on the performance of the California based company, with results coming in below consensus Wall Street estimates. The firm’s net loss hit $167m, up from $90.2m.
As the moniker suggests, these equities have performed the role of bonds for income-hunters while yields from the real thing have dipped lower and lower since the financial crisis.
9 February 2017
Avinash Vazirani, manager of the Jupiter India Fund, argues that there has never been a more exciting time to invest in Indian companies - particularly those with a domestic focus. The opportunities, he says, are considerable given the country’s youthful population, the acceleration of ‘catch-up’ growth, and the significant reforms being enacted by Prime Minister Narendra Modi.
8 February 2017
Founded in 2014, Crux Asset Management is a relative newcomer to the City - or in precise geographic terms, London’s West End.
That may be slightly overstating things because even in the latest figures another $800m or so was set aside to cover the ongoing costs of remediation. That was twice the underlying profits announced by BP in the quarter. But in the context of a total cost to shareholders of more than $60bn, the issue is clearly becoming much less significant in financial terms.
Catching the market’s turning points is one of the hardest and most dangerous aspects of investment - there’s a reason it’s called ‘catching a falling knife’. It’s hard because the wisdom of crowds is much quicker and smarter at picking up on significant changes than individual investors are. Prices turn up long before any improvement is evident in the headlines and they roll over when everything still looks rosy. By the time hindsight has shown a turn is for real, you’ve missed the boat - or as James Goldsmith used to say ‘when you see a bandwagon, it’s too late’.
The matter of what really drives share prices remains one of some debate. However, the level of interest rates, how equity valuations measure up versus bonds and whether corporate earnings are rising or falling are probably three good places to start.
According to the Super Bowl Theory, last night’s win by the New England Patriots should see the Dow Jones Industrial Average lose some of its recent gains as we head through 2017. A popular indicator among US investors, the Super Bowl Theory has it that if an AFC team beats an NFC squad, which happened when the Patriots beat the Atlanta Falcons yesterday, the Dow will fall. And according to Sam Stovall, author of The Seven Rules of Wall Street, the Super Bowl Theory has been right 80% of the time since 1967.
6 February 2017
This month marked a significant new entry in my log, however, as I added to US government bonds for the first time in a long time - part of following through on the barbell strategy I’ve outlined previously. To recap, this involved adding to defensive Income assets like US government and investment grade bonds on one end, and adding to higher yielding, higher risk assets like local currency emerging market debt on the other.
3 February 2017
Addressing a gathering of industry executives at the White House earlier this week Trump said that he would be streamlining the sign-off process so “you can actually get it approved if it works instead of waiting for many, many years.”
2 February 2017
Figures last week from the Treasury and HM Revenue & Customs confirmed that, during the last three months of 2016, £1.56billion was pulled down from pensions using the new freedoms by 162,000 people.
There have been studies which suggest the January barometer works more often than not over the very long term in America and that may be enough for some investors to take notice. However, there are at least a couple of problems with this.
1 February 2017
The growth in sales of Apple’s core product, despite it now being a decade old, came as a relief to investors who have started to fret about what comes next from the world’s largest publicly-listed company. The shares rose 3% after the announcement of the latest quarterly results and, at $125, they are not far behind their all-time high of $133.
- Lists of recommended funds, such as Fidelity’s Select 50, can help investors choose funds for their portfolios.
31 January 2017
1. Asian companies are already paying high dividends. The dividend yield of the benchmark MSCI Asia Pacific ex Japan Index sits just under 3%, which is significantly higher than the yield of US stock indices such as the S&P 500.
Eurozone GDP growth rose 0.5% between the third and fourth quarters of 2016, taking growth last year overall to 1.8%. Unemployment also fell to a seven-year low but it was inflation that caught the eye, with the annual rate of price rises jumping to 1.8%.
The Danish pharmaceuticals giant, which is a world leader in diabetes drugs, is to invest £115 million in a new science research centre in Oxford over the next 10 years. Set to employ 100 scientists, the facility will work on new ways of treating type 2 diabetes, a growing problem worldwide because of the increasing prevalence of obesity and sedentary lifestyles.
30 January 2017
Woolnough started with a reflection on the past decade. Three themes stood out:
Largely trustworthy and responsible, roosters are also characterised as being outspoken and daring at times. Potentially useful attributes then in today’s fast-moving and often unpredictable political and economic climate.
27 January 2017
The usual caveats apply with the GDP figure - this is the preliminary estimate based on only a minority of data that ultimately contribute to growth numbers - but, if confirmed in the months ahead, it adds to the case that the UK has dodged an immediate downturn following its vote to leave the EU.
26 January 2017
Given the uncertain external environment, it is important to recognise that the trust remains focused on companies set to benefit from the growth and development of the domestic consumer as opposed to overseas markets that could become tougher to access. Many categories of consumer goods and services in China are still underpenetrated relative to other countries and there remains significant growth potential in companies related to consumption and the changing ways in which people consume.
This could mean a buy-to-let that can be sold or milked for rent, but often boils down to a vague plan to use equity tied up in their home, which has risen dramatically in value over the years.
While diverse factors such as a company’s product innovation or geographic expansion sway stock prices, government bond investing is driven predominantly from the ‘top down’ by macroeconomics and central bank policy.
25 January 2017
Another contrast can be drawn in terms of external political relations. Whereas Donald Trump may see Russia as a potential friend but has a hostile stance towards China, these positions appear to be reversed in Europe.
With climate change and other forms of environmental damage becoming increasingly indisputable, demand for viable clean energy and renewable energy solutions (hydro, solar and wind) is growing.
Most of the time, exchange rates are just background noise - you earn in pounds, you spend in pounds. At times of particular currency volatility, we may notice a change in internationally-traded goods like petrol or clothes. But really we only feel it when we come to buy our holiday money. This is why Harold Wilson was able to claim in 1967, disingenuously of course, that sterling’s devaluation did not affect ‘the pound here in Britain, in your pocket, in your purse, in your bank.’
24 January 2017
The dramatic slide in BT’s share price was investors’ response to news that the company’s revenues and profits would be lower than expected, in large part due to a worsening accounting scandal at its Italian business. Having warned last year that ‘inappropriate’ behaviour at its Italian subsidiary would cost £145m, today it raised that estimate to £530m.
To be clear, this is not the ‘Hydra-headed monster’ of the 70’s which prompted the Fed to raise rates to 20%. US consumer prices were 1.6% higher in October 2016 than they were a year ago – modest by historical standards, but robust enough to justify tighter monetary policy1.
For over thirty years, bond prices have boomed on the back of increased demand, product innovation, and - most importantly - declining interest rates. But with central banks the world over posting zero and negative interest rates, some say that they cannot go any lower – and bond prices any higher.
23 January 2017
Today the Prime Minister will start explaining what her vision means in practice — and how it might differ from that of her predecessors.
While media reports have articulated concerns about Trump’s “post-truth” approach to politics, corporate decision makers in the US, Europe and Asia seem far less bothered.
20 January 2017
But for Alex Savvides, falling profits spell opportunity. The manager of the JOHCM UK Dynamic Fund looks for top-notch, historically profitable companies whose returns have taken a temporary step down.
18 January 2017
That is one possible interpretation of the market’s reaction over the past 24 hours, a period in which the Government made clear its overarching aims in negotiating Britain’s EU exit, and two economic indicators suggested inflation, and by implications interest rates, are now headed upwards.
The Arab spring that was to first claim Tunisia’s government three years later marked the beginning of an international movement to give a voice to those left behind by the prosperity created by globalisation.
A year ago, the financial crystal ball season served up a humdinger. You may remember a large UK bank - nameless, but we all own a big stake in it - issuing a note warning of a ‘cataclysmic year’ ahead and advising investors to ‘sell everything except high-quality bonds’. The bank predicted a fall of between 10% and 20% on US and European stock markets. The price of a barrel of oil, then languishing at $35, was expected to fall to $16. The Federal Reserve, which had just raised interest rates for the first time in a decade, was ‘playing with fire’.
17 January 2017
Their ideal investments are highly profitable companies which are under-researched (by competitors) and undervalued. Such stocks sound almost too good to be true – why would a well-run, profitable company be overlooked by other investors, and by extension, trade at a discount?
The UK’s annual inflation rate hit 1.6%, which is the highest it has been since July 2014 and a bigger leap than had been widely expected. While the Consumer Prices Index (CPI) had been expected to show a 1.4% rise year-on-year, figures from the Office for National Statistics show that the actual figure came in at 1.6% - a sharper-than-expected acceleration from November’s 1.2%.
“I think the politics are always going to be complex in Europe. We can’t get away from that. But I think if you look at some of the issues that have been evident in Europe over the last few years, and actually what’s changed as a result of it; relatively little.
16 January 2017
The pound fell to below $1.20 overnight and forced a new intraday record for the FTSE 100 above 7,350 this morning. The explanation of those movements is well rehearsed by now - the falling value of the pound helps dollar-earning multinationals that dominate UK share indices because their profits rise automatically in sterling terms.
No longer just obsessed with all of the above, once we’d got that (in typical British eyes anyway) all-‘important foot on the ladder’ many thought why stop there? Increasing numbers of investors started seeing property as a form of financial security. As house prices boomed, the appeal of someone else paying off your mortgage while you also sat on a property rapidly increasing in price was more than many could resist. Forget pensions, some said, especially in the wake of the pension mis-selling scandals of the day. You can’t ‘lose everything’ if you own a property, they said. So the shift towards these tangible assets, actual bricks and mortar, began in earnest.
13 January 2017
One such opportunity is about to shrink for those able to make an additional contribution to their pension pot. From 6th April, the start of the new tax year, the amount that can be paid into a pension using “carry forward” will fall. Here’s why.
That said, I believe 2017 really will serve up a change of direction after the long slog out of the financial crisis of 2008. The dramatic reversals of expectations last year – Brexit and the US Presidential election, in particular – make this feel like a watershed for investors.
Amid the rise in US Treasury yields and the appreciation of the US dollar, there are two key implications for the Japanese equity market.
Thankfully for investors, the real world is messier. Profitmaking is the norm, even if some margins are razor-thin.
The manager of the Fidelity Enhanced Income Fund uses a ‘covered call’ strategy to deliver income beyond what is offered by the FTSE All Share Index. He sells other investors a ‘call option’, which is the right to buy stock from the fund at an agreed ‘strike’ price in the future.
12 January 2017
A year ago this week the financial pages shivered from the warnings of Royal Bank of Scotland economist Andrew Roberts, head of the bank’s European rates research team, who had told investors to “sell mostly everything” after his team reported warning lights flashing all over economies and markets.
Such is human fallibility and the fleeting nature of luck. A manager might employ a style which works for the right companies, in the right region, at the right time. When markets shift – as they inevitably do – the value of the secret sauce can evaporate, sometimes forever.
11 January 2017
Progress towards achieving the former has been and remains elusive. Bouts of growth have been followed by disappointment. When the government raised VAT from 5% to 8% in April 2014, hopes ran high the economy was recovering at a fast enough pace to weather the rise.
It’s been a long wait. The FTSE 100 ended 2016 at an all-time high of 7,143 and has since risen above 7,200 as the positive mood spilled over into the New Year. It is the first time that the UK’s benchmark index has closed a calendar year at a record level since 1999. Shares are on a roll, up 30% since last year’s low in the UK. Wall Street’s rally since the US Presidential election has been matched only a couple of times in the past century.
10 January 2017
Morrisons saw like-for-like sales rise by 2.9% in the nine weeks to the end of December, with its fresh food range, beers, wines and spirits all performing strongly. It said its Nutmeg clothing range also did well.
Have emerging markets ever been attractive in their own right? Certainly, argues Nick Price. The manager of the Fidelity Emerging Markets Fund points to three factors which distinguish developing countries from their peers: growing populations, immature equity markets, and an abundance of untapped natural resources.
The view of markets since the referendum result has been that leaving behind economic privileges from the EU - principally those gained through single market and customs union membership - would be broadly harmful for UK growth in the near-term, and the risk of that happening caused a downwards correction in the value of the pound.
9 January 2017
On Tuesday Morrisons gives its December trading statement. The company had a good 2016 with rising sales growth and investors will be hoping that the momentum continued over the run up to Christmas and the new year.
6 January 2017
This is the year, according to best estimates, that the global “dependency ratio” begins to rise after more than forty years of falls. This is the figure that compares the number of non-working age people relative to those of working age, which is regarded as anyone aged 15-64.
This trend of overconsumption is mirrored in the recent behaviour of financial markets. David Gait, manager of the Stewart Investors Asia Pacific Leaders Fund, argues that investors are the unwitting victims of a central bank-fuelled debt binge. Low interest rates are driving money into unproductive investments. Firms are taking out cheap loans to finance expensive buybacks, and banks are lending to speculators instead of entrepreneurs.
As an Asia-based portfolio manager with my ear to the ground, I have been witnessing several structural shifts in the region that I expect will continue in 2017 and beyond.
First up, the high street clothes chain Next reported sales figures for the crucial Christmas period, formally marked as the 54 days leading up to December 25.
5 January 2017
Numbers published by the FT indicate that 11 companies and banks sold $19.9bn in debt in the United States as the markets reopened after the holiday period – a record size start to 2017 for debt issuance.
The simple answer is probably yes. Whereas the stock market bubble of 1999 was forged in a cauldron of excitement about the new technologies of the day that paid scant regard to realistic stock prices, this latest rally has at least some of the hallmarks of realism.
As we move into 2017, the annual refresh has never been more useful. That’s because the election in November of Donald Trump as US President has ushered in a radically different investment environment. It’s a regime change in more than one sense.
4 January 2017
Brexit (Britain + exit) is a much simpler phrasing of Britain’s decision to leave the EU, while Trumpflation (Trump + inflation) quickly identifies Trump’s policies as inflationary. But if we consult our crystal dictionaries for 2017, what portmanteaus can we expect to see going forward?
3 January 2017
The high-point back then, as now, came on the last trading day of the calendar year. It has been brushed up against since, and even briefly surpassed last year, but never been truly broken through.
The first draft of history is always more about the ‘what’ than the ‘why’ and as the dust begins to settle on 2016, here is its story in four charts:
30 December 2016
Trump actually represents more of an unknown than Reagan. While the latter made his name outside politics as a film actor, his route to the presidency came only after years spent as the Governor of California.
The index closed 37 points higher at 7106.08 trumping the 7103.98 mark set in April 2015, the previous historic closing level.
29 December 2016
Despite a tumultuous year, in which one political shock after another has shaken the stock markets – albeit only temporarily as it happens – she has resolutely stuck to her guns and refused to get rattled.
28 December 2016
23 December 2016
22 December 2016
The Dow certainly looks set to be on the brink of a new milestone, but what is the significance of this?
In making this change, the Fed has not fully incorporated the potential fiscal stimulus proposed by Trump – according to Chairwoman Janet Yellen, only some participants might have taken this into account.
21 December 2016
Back in 2004, 22% of people, more than one in five, expected to retire in their fifties.
Maybe more than you think.
The International Monetary Fund put Britain at the top of its 2016 table of growth forecasts for major countries in October, despite earlier warning about the risk of a Brexit shock2.
As we move into 2017 it seems likely that we will see a return to inflation, if not imminently, then certainly within the next few years as austerity looks set to drop away and debt-fuelled government spending stokes growth and incomes in the US.
20 December 2016
19 December 2016
15 December 2016
14 December 2016
13 December 2016
12 December 2016
6 December 2016
5 December 2016
1 December 2016
30 November 2016