Our weighted average return in May was -5.69%. Since 2015, we have generated a net return of +27.73%.

In terms of investment strategy performance, our weighted average net returns for May were (a) -0.33% for conservative strategies, (b) -5.51% for balanced strategies, and (c) -8.21% for aggressive strategies.

May was a difficult month. At the start of the month, US President Donald Trump announced that contrary to all hopes and expectations, the US would in fact be going ahead with their tariffs on Chinese imports. All risk assets sold off on this news. Trump’s decision to go after Chinese technology company Huawei led to a particularly sharp selloff in the technology components and semiconductor space. Then, on the very last day of the month, Trump also threatened Mexican imports with tariffs. Thankfully, these tariffs were cancelled a couple of weeks later and risk assets have been recovering in June. In May, the S&P 500 lost -6.58%, the Dow fell -6.69%, the NASDAQ shed -7.93% and the Russell 2000 closed down -7.90%. International equities also took a hit. Japan was off -4.87% while German markets lost -6.53% and Chinese large caps fell -9.26%.

The chaos caused on the trade front sent investors scrambling to US Treasuries, and the market is now pricing in three Federal Reserve rate cuts by the end of 2020. The Barclay’s Aggregate Bond index returned +1.83% in May and the yield on the US ten-year note is currently around 2%. Germany just released its lowest yielding ten-year bund ever at a yield of -0.24%. Austria’s 100-year bond is trading at a yield of 1.2%. Austrian inflation is 1.7%.

So what does all of this mean? Where do we go from here?

Well, higher rates in the US had been a primary factor in the weakness in Emerging Market bonds last year, and they have been recovering nicely. Higher rates in the US were also used as a rationale as to why the US dollar had been appreciating, and – thus far in June – the US dollar has weakened almost 2% versus global currencies. Nevertheless, the US dollar remains strong, which would be bullish for Emerging Market exports, were it not for the constant threat of US trade tariffs.

Turning to base metals, there is a considerable degree of cognitive dissonance in this space as well. The price of copper fell sharply (-9% in May) after Trump’s tariff decision, but according to industry sources, demand remains strong. However, the current price level does not incentivize new production. Therefore, the volatility in the commodity price is setting up a scenario where low prices now will at one point lead to a violent move upward in price when the market comes to terms with the fact that copper will be in a structural deficit for many years before new supply comes online. Timing when exactly this will occur will be difficult, but it will happen.

We continue to focus on finding investments that suit the dynamics of the current market environment and should ultimately prove to be very profitable despite being out of favour and subject to the vagaries of presidential tweet storms. Trump is many things, but he is not stupid and he has just kicked off his 2020 reelection campaign. His previous platform needs renewing and a stronger footing. Will Trump “the dealmaker” come to the fore? Will Trump “the builder” add infrastructure investment to his platform? He has caused enough chaos to stop the Fed rate hike train in its tracks. It remains to be seen if the cheap money that will be available in the foreseeable future will result in something that will help define US and global prosperity for decades to come, or dissuade risk taking as it has in Europe.

As students of history, we believe that the impressive pace of global innovation will continue, and will ultimately drive political agendas rather than be shaped by them. Patient investors who put faith in future prosperity will be rewarded, and market volatility will prove to be a blessing to a new generation of investors.

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!