Tag Archives: Historical Market Performance

OUR MARCH RESULTS

Our weighted average return in March was +0.10 %. Since 2015, we have generated a net return of +37.64%.

In terms of investment strategy performance, our weighted average net returns for February were (a) +1.01% for conservative strategies, (b) +0.30% for balanced strategies, and (c) -0.46% for aggressive strategies.

March was another positive month for financial markets. In December, markets sold off strongly on fears that the US Fed would continue to raise rates. The Fed buckled and now markets are pricing in the likelihood of a rate cut rather than a rate hike. Both bonds and stocks continued to gain strength on the back of this sentiment. Last month, the S&P 500 (SPY US) rose +1.81%, the MSCI Emerging Market index (EEM US) gained +1.13%, High Yield US corporate bonds (HYG US) rose +1.29%, Emerging Market bonds (EMB US) gained +1.51% and US investment grade bonds (BND US) returned +1.94%.

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OUR FEBRUARY RESULTS

Our weighted average return in February was -0.47%. Since 2015, we have generated a net return of +37.50%.

In terms of investment strategy performance, our weighted average net returns for February were (a) +0.79% for conservative strategies, (b) -0.88% for balanced strategies, and (c) -0.53% for aggressive strategies.

Financial markets continued their positive trend in February, fueled by more encouraging US-China trade talks and heightened confidence that the Fed would not be raising rates in the near future. “Lower rates for longer” translated into higher prices for high yield debt across all markets and equities continued their positive trend. In February, the S&P 500 (SPY US) rose +3.24%, High Yield US corporate bonds (HYG US) rose +1.21%, Emerging Market bonds (EMB US) gained +0.40% and US investment grade bonds (BND US) returned -0.09%.

I am at a loss to report anything of note that actually happened in financial markets or world politics in February. Brexit discussions dragged on. Tariff implementation was extended and trade deal discussions continued without any actual agreements. Softer Chinese economic data was interpreted to mean greater Chinese stimulus going forward, but Chinese industry seems to be more concerned about tariffs. European growth continued to be anemic. European industry is also worried about tariffs. Data revealed that German economic growth was flat in the last quarter of last year.

Only the US showed that, despite the impact of the government shutdown, everything seemed to be going fairly well. Data showed that US GDP grew +2.6% in the fourth quarter. This was slower than the previous 3.4% quarter on quarter annualized growth rate in Q3, but showed that the US economy continues to be on a strong footing.

Looking at our investment performance, we were pleased at the returns for our conservative strategies, but our security selection let us down in our balanced and aggressive mandates. Long-term outperformance can only be achieved by high conviction stock picking, and some of our conviction holdings had a sub-par February. In terms of investment strategy, we continue to look for interesting companies that have not participated in the recent rally, but stand to benefit from continued lower interest rates and moderate economic growth.

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!
Pauls
FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.

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“Markets in Turmoil”

2 months ago we saw a tweet from Charlie Bilello. It was 27th December. The tweet stated that CNBC will be airing “Markets in Turmoil” episode that night. Episodes of this particular show are aired when markets have been falling hard and everyone is scared.

The tweet also included a look back at past occasions when the show was aired and the performance of the S&P 500 index following the episodes.

We’ve updated the table to include the most recent data:

Markets in Turmoil S&P 500 close 1-week 1-month 3-month 6-month 9-month 12-month Up to 2/25/2019
2/5/2018 2649 0.30% 3.70% 2.40% 8.90% 4.30% 5.41% 7.85%
2/8/2018 2581 5.90% 7.40% 6.30% 10.40% 10.60% 7.04% 10.66%
10/11/2018 2728 1.50% 0.10% -4.35% 3.29%
10/24/2018 2656 2.10% 0.90% 0% 6.06%
12/27/2018 2489 -1.59% 7.21% 12.74%

Going back to 2010 the airing of Markets in Turmoil basically has worked as a buy signal. Every single time after the show was aired 6 months later markets were higher, the same can be said regarding periods of 9 months and 12 months.

1-week after the airing of Markets in Turmoil more than 70% of time markets are higher, more than 60% of time markets are higher 1 month later and more than 90% of time markets are higher 3 months later. Since the last episode aired on December 27th S&P 500 Index returned 12.74%.

Any individual episode of Markets in Turmoil shouldn’t be taken as a buy or signal. Next time the episode could air when the markets are just starting to fall or vice versa starting to go up. Using the data and table above, we want to point out that history shows patience pays off. The longer your investment time horizon the less sense it makes to try and time every single market move. read more

OUR JANUARY RESULTS

Our weighted average return in January was +8.22%. Since 2015, we have generated a net return of +38.15%.

In terms of investment strategy performance, our weighted average net returns for January were (a) +2.36% for conservative strategies, (b) +7.64% for balanced strategies, and (c) +11.17% for aggressive strategies.

January was a considerably better month than December. As mentioned in last month’s commentary, US Fed Chairman Powell’s statement that the Fed was “listening closely to markets” on January 4th proved to be just what the market needed to stop panicking about the prospect of rising rates. The partial resolution of the US government shutdown added to positive sentiment, as did more positive dialogue regarding trade tariff negotiations between the US and China. As such, the S&P 500 (SPY US) rose +8.01%, Emerging Market equities surged +10.34% (EEM US) and Emerging Market bonds gained +4.78% (EMB US).

Emerging Market securities had a dreadful 2018, but we found it very interesting that they refused to put in new lows as US markets were crashing in December. We interpreted this price action to be a very positive divergence from the nonsense going on in US markets, as Emerging Markets tend to be more volatile than US securities. Put simply, the fact that EM securities were actually rising as US securities were falling implied that perhaps not all hope was lost. Thus far, catching this positive signal and not ‘selling everything’ during December’s panic has proven to be a wise course of action.

Despite correctly analyzing this US –vs- EM price dynamic, experience dictates that such important price movements must be confirmed by subsequent data and anecdotal evidence. This is why we also mentioned is last month’s commentary that we would “be trying to determine whether the Q4 selloff and market panic matched the actual performance of companies across all sectors of the US economy.” We took strong positive signals from the major US banks, who – despite mostly missing revenue targets due to poor trading revenues – commented that the US consumer was in good health. These statements we subsequently confirmed across most sectors as earnings season progressed.

In terms of trading activity, we added Canada Goose Holdings (GOOS US), which had sold off heavily due to a diplomatic dispute between Canada and China. Pictures of a six-block line-up to get into the new Canada Goose store in Beijing at the end of December confirmed our suspicions that the Chinese consumer might not hold a grudge. We anticipate that Canada Goose will soon release a set of impressive earnings from last quarter.

We have stated in previous commentaries that volatility creates opportunities, but this is hard to appreciate when markets are crashing, and we are very thankful to our clients for sticking with us after such a traumatic December. January’s returns were more substantial than we could have realistically hoped for at the end of last year. That being said, we are by no means satisfied and continue to seek out new opportunities that will drive even better returns going forward.

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!
Pauls
FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.
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Emerging Markets Bonds performance when US rates rise

2018 was a tough year for bond investors. US Total Bond Market (represented by BND US ETF) returned -0.1% and Emerging Markets Bonds (represented by EMB US ETF) returned -5.5%.

Looking at last year’s returns, a logical question arose: what should we do with our exposure to Emerging Markets (EM) Bonds? Should we keep our allocation unchanged, reduce or eliminate it and replace it with US Treasuries?

The logical chain of thought dictates that investors require higher rates of return for higher levels of risk. If the FED is increasing rates, increased rates provide an option to have investments in safe government bonds with higher yields than before. It raises the required rate of return for taking higher risks, thus investors require higher yields on riskier assets for example EM bonds. It should also lead to a higher spread between EM Bonds and US Treasuries.

Let us look at the historical data.

Invesco has identified 9 periods with rising US rates since 1994 to 2016. The average change in the 10-yr US Treasury yield was 162 basis points. The average return for the US Treasury Index during those periods was -4.65%. Further, we look at how EM Bonds returns have compared to US Treasuries.

The above graph shows the difference between EM Bonds returns and US Treasury returns during previously identified periods. In 7 out of 9 periods, EM Bonds have outperformed or delivered higher returns in periods when US rates were rising.

EM Bonds are more volatile than US Treasuries, though investing in emerging markets debt over the long term has rewarded investors historically. Let us look at the example where an investor would enter the market at the “worst” possible time (at the beginning of 2007 before financial crisis).

J.P. Morgan EMBI Global Total Return Index (White), S&P 500 Total Return Index (Yellow), Bloomberg Barclays US Treasury Total Return Index (Pink)

J.P. Morgan EMBI Global Total Return Index (JPEIGLBL), S&P 500 Total Return Index (SPXT), Bloomberg Barclays US Treasury Total Return Index (LUATTRUU)

Over the chosen period of 01/01/2007-01/18/2019 the best performance was delivered by investments in the large cap stocks (represented by S&P 500 Total Return Index), in total returning 143% or 7.66% annualized. That’s after the recent fluctuations in global markets. EM Bonds returned 104.96% or 6.13% annualized while US Treasuries returned 51.27% or 3.49% annualized.

Further, we look at investments in EM Bonds from a mid-term investment perspective.

Source: Bloomberg, J.P. Morgan EMBI Global Total Return Index

The above graph shows annualized 3-year return for investments in EM Bonds. Since 1996, there has been only one 3-year period with a negative return for EM Bonds, with a total return -0.21%, or -0.07% annualized. The average total return for 3-year investment in EM Bonds since 1996 was 32.9% or 9.9% per annum.

We can conclude that rising US rates does not result in worse performance delivered by EM Bonds investments.  Historically, EM Bonds on average have outperformed US treasuries in periods when US rates were rising. Over the long-term, EM Bonds have significantly outperformed US Treasuries. Furthermore, the average 3-year return per annum has been 9.9% since 1996. Increased allocation to US Treasuries could provide lower overall portfolio volatility in the short term, yet may position the portfolio to miss the potential higher performance of EM Bonds over a longer period.

 

FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities. read more

OUR NOVEMBER RESULTS

Our weighted average return in November was -0.96%. Since 2015, we have generated a net return of +38.73%.

In terms of investment strategy performance, our weighted average net returns for November were (a) +0.15% for conservative strategies, (b) -0.09% for balanced strategies, and (c) -2.11% for aggressive strategies.

Markets continued to be extremely volatile in November. The S&P 500 index traded all over the place, giving up -3.83% in the third week of the month, before jumping +4.71% the very next week. By month end, the S&P 500 had gained +2%. Emerging market stocks (+5.07%) finally managed to rally on the back of lower US bond yields, and US investment grade bonds ended the month +0.64%.

Politically speaking, the US mid-term elections played out as expected with the Republicans gaining seats in the Senate, and the Democrats claiming a majority in the House of Representatives. A Democrat majority in the House will now be able to curtail Republican attempts to expand fiscal stimulus to ingratiate themselves to voters before the Presidential elections in 2020. Party politics aside, the overwhelming political issue in the world today remains US-China trade tensions and the continued uncertainty as to whether a deal will be able to be reached or not. Uncertainty abounds in Europe as well due to Italy’s budget issues and Brexit.

As such, we are in an environment where companies are recording record earnings, but their future ability to generate profits are being heavily discounted due to political uncertainty. This is evident in the price action that we are seeing in certain sectors of the market.

For old school portfolio managers with an equity mandate, volatile markets mean moving assets into defensive sectors such as consumer staples and utilities. As a result, these sectors have performed very well since the summer, whereas growth sectors such as information technology and biotech have sold off heavily. Conceptually, this makes a lot of sense, but in actuality, this is purest form of trying to ‘time markets’ and intuitively speaks to why most portfolio managers fail to beat their benchmark indices in the long-run. How so? Because most often this means chasing returns and ignoring fundamental valuation principles that are the foundation of long term outperformance.

For example, let us take a look at a classic consumer staple stock: Proctor & Gamble. P&G has a number of different brands that households use every day, from skin care (‘Olay’), to laundry detergent (‘Tide’), to diapers (‘Pampers’), to dish soap (‘Fairy’). The ‘every day’ use of these products is the critical component of why P&G is considered consumer staple company. P&G is great company, but it faces massive challenges on a daily basis to stay relevant to its consumers who are constantly tempted by new, upstart brands with product descriptions that say things like “small batch” or “artisanal”. P&G’s sales have been flat to negative over the past four years and they pay high multiples to acquire new brands (their last acquisition was done on a 5x price to sales valuation…). All of this would be fine if not for the fact that P&G shares trade at a steep 23 times next year’s earnings, with no intrinsic growth in sight.

Now, let us take a look at Apple. Apple makes the most successful and possibly most technologically advanced consumer product in history: the iPhone. With the exception of infants wearing ‘Pampers’, anyone with an iPhone spends considerably more time on this device on a daily basis than they do with every single possible combination of P&G products, and, from anecdotal evidence, even infants would rather use an iPhone than a diaper. However, since Apple became the first company to exceed 1 trillion in market capitalization this summer, Apple shares have lost around 30% from their highs – or 365 billion USD in valuation. This equates to 1.5x the current market capitalization of P&G. A practically unfathomable amount.

Although Apple’s sales have also slowed in the past couple of years, they remain astoundingly high. From a valuation perspective, after removing the net cash component from their market capitalization, Apple currently trades at a 10.72 next year’s earnings – which means that the market values every dollar in earnings that P&G generates as twice as valuable as a dollar earned by Apple. Yes, I understand that we are comparing apples to ‘tide pods’, but I welcome any and all arguments that attempt to justify this dynamic above and beyond short term price movement.
We have not owned Apple shares for quite some time. This was due to the fact that we saw more compelling growth opportunities or relative value elsewhere in the market. However, at these valuations, Apple is once again a screaming buy and we have initiated large positions in Apple over the past couple of weeks. By the way, the last two times Apple shares traded at a P/E multiple this low, they rallied over 130%… Overall, this sell off – although fraught with much near term negative price action and flat out stress – has given us the chance to buy back shares of companies that we deem to be the consumer staples of the future at significant discounts to where they had been trading for a long period of time. It is hard to be thankful when you are in the second month of negative returns, but this is a battle won with sound rationale and patience.

A year from now we will be talking with prospective clients that ‘knew’ that they should have been buying Apple shares ‘at the end of 2018’ but found some reason not to. They will say something to the effect of ‘yes, Apple @ 170, that was easy money’. We will smile and agree. Not because it was easy, but because we actually did it.

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!
Pauls
FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.
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OUR OCTOBER RESULTS

Our weighted average return in October was -3.88%. Since 2015, we have generated a net return of +40.48%.

In terms of investment strategy performance, our weighted average net returns for September were (a) -1.36% for conservative strategies, (b) -6% for balanced strategies, and (c) -2.97% for aggressive strategies.

October was a brutal month. In all of 2017, the S&P 500 index had 12 trading days where the daily change in price exceeded 1%. October had 10 such trading days. The monthly performance for key equity index ETFs were as follows: S&P 500 index -6.91% (SPY US), Euro Stoxx 50 index -8.18% (FEZ US), and MSCI Emerging Markets index -8.76% (EEM). Bonds outperformed equities, but there was nowhere to hide in the fixed income space as well. The Vanguard Total Bond Market ETF was -0.86% (BND US), the iBoxx $ High Yield Corporate Bond index (HYG US) was -1.98% and the JPMorgan Emerging Market Bond index (EMB US) was -2.42%. Ugly numbers. The only safe haven was the US dollar, which increased 2.59% versus the euro.

So what happened?! Put simply, the market went from being enthusiastic to very worried in an extremely short time period. Why? As always, there is a multitude of factors. Economist Scott Grannis (http://scottgrannis.blogspot.com/) has designated the current market panic attack as ‘global angst’. He writes “a weakening Chinese economy, budding tariff wars, concerns about Feb tightening, a fragile Eurozone, weakening emerging market economies, rising oil prices, and all coupled with the fact that we are entering the 10th year of an economic expansion (which by itself makes investors quite nervous – how much longer can the good times last?). None of these factors have appeared out of the blue however; they’ve all been headwinds for a while, but it seems they have rather suddenly combined into something like a perfect storm.” We agree. We also firmly believe that none of these challenges are insurmountable, nor need threaten global prosperity in the mid to long term.

On a positive note, everyone that had been insisting that a sell off was imminent was finally proven right for the first time since September of 2011 – the last time the S&P 500 experienced such a large drawdown. For those who are interested in historical market data, we would like to point out that over the very next month – October of 2011 – the S&P staged a staggering rally of +10.77%. Moreover, from September 30th, 2011 to October 31st, 2018, the S&P 500 has managed a total return of +137.10%. Yes, there are evidently times that history has shown it to be wise to sit on the sidelines, but historical evidence weighs heavily on the side of those who continue to be invested, and, if possible, take advantage of market selloffs.

If you have been “waiting for a correction”, we would love to hear from you. Why wait another seven years?

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!
Pauls
FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.

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OUR SEPTEMBER RESULTS

Our weighted average return in August was +4.74%. Since 2015, we have generated a net return of +46.16%.

In terms of investment strategy performance, our weighted average net returns for September were (a) +.03% for conservative strategies, (b) +1.70% for balanced strategies, and (c) +9.37% for aggressive strategies.

September marked the 10th anniversary of the collapse of Lehman Brothers. Despite considerable media mention of this painful theme, US equities continued to trade higher and gained 0.59% in September, posting an impressive gain of 7.7% for the third quarter of this year. In terms of economic data, US consumer confidence hit its highest level since 2000 (around the peak of the ‘dot.com’ bubble), while US small business confidence hit its highest level since the National Federation of Independent Businesses began its survey in 1974. Moreover, monthly average unemployment figures hit their lowest level since 1969 – the year the US Apollo Mission successfully landed on the Moon.

In light of these strong US economic data, the US Fed decided to raise rates in September for the third time this year, bringing the target range for the federal funds rate to 2.25%. This resulted in continued weakness in US treasury prices (US 10 Year Notes were -1.46% in September), and the bond market in general. At the beginning of the year, the market was pricing a 20% chance of three rate hikes in 2018. The market was wrong and bond prices continue to weaken. Resultantly, the US 10 Year Treasury Note yield is at its highest level since 2011. US 30 Year Treasury Bond yields have risen as well, somewhat dimming talk of inverted bond yields and their tendency to signal recessions (what happen to all of that chatter?). The US economy is very strong, and in this context, rising bond yields (which mean falling bond prices) are completely normal. While such a dynamic results in mark-to-market losses for the holders of longer duration bonds, it also means higher yields for new buyers on bonds. Overall, the Barclays US Aggregate Bond Index was -0.55% last month.

In the commodities space, Brent Oil gained +6.85% and we finally saw a rally in base metals as copper gained +5.89% and zinc gained +7.52%. A continued standout in the commodities space was Vanadium, whose price in Europe rose 19% in September alone for a stunning year-to-date increase of 152%.

We have mentioned our top holding Largo Resources (which is one of the only pure plays on vanadium) in our past two monthly commentaries. We are again very pleased to report that Largo shares rose 32.48% in September. Although we have been adjusting our portfolio exposures, we continue to hold a strong conviction in our investment thesis. This is how you make money in capital markets – by working hard to uncover compelling ideas before the market discovers them, and then have the underlying conviction to hold on until something fundamentally changes. Based on our calculations of publically available data, Largo is set to deliver phenomenal results for Q3, while reducing financing costs at a rapid rate. We also anticipate that at least one major investment bank will initiate coverage on Largo before the end of the year, and that will attract even more positive attention.

In September, we took profits on our US equity index funds. We also continued to add incrementally to our Emerging Markets and European holdings. Time will tell if this rotation was a shrewd maneuver. However, if I was an American businessperson with soaring confidence, record earnings, difficulty finding domestic workers, and a pocket full of valuable US dollars, I just might be tempted to look at buying some world-class businesses on the cheap (Europe) and placing a few bets on the dynamic, underpriced growth that is going on in the developing world. Oh, I forgot to mention that wages in the US were growing at their fastest pace in the US since 2009…

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!
Pauls
FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.
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OUR AUGUST RESULTS

Our weighted average return in August was +2.67%. Since 2015, we have generated a net return of +39.53%.

In terms of investment strategy performance, our weighted average net returns for August were (a) -0.33% for conservative strategies, (b) -0.71% for balanced strategies, and (c) +7.18% for aggressive strategies.

August was a difficult month for almost all asset classes other than US stocks, as it remains quite clear that international trade tensions have done little to dim US business confidence.

Emerging market securities were hit particularly hard by the economic crisis in Turkey, and traders chose to extend the selling to European banks due to their exposure to the Turkish banking sector. What’s more, Emerging Market currencies sold off (for example Argentine Peso -25.63%, Turkish Lira -24.86%, South African Rand -9.62%) and industrial metals were also hit hard (Copper -6.45%, Zinc -6.52%, Nickel -8.84%).

During times like these, it is hard not to be swept up in the mania of crowds. However, months like this past August provide tremendous opportunity in the long run. How can this be? Well, if you are a confident US capitalist armed with dollars and a surging share price, there will be a point where you will be enticed to buy up foreign assets on the cheap by using your strong currency and cheap access to capital. This proposition is especially enticing if these foreign assets are in markets that have a higher rate of growth than your domestic market – which is the case in most Emerging Markets. Consensus projections for GDP growth for the largest Emerging Markets are still around +6%, and, with the exception of China, are expected to grow even more in 2019. That being said, what is most important is not the rate of growth, but rate of change or ‘surprise’ in terms of perceived growth. Put simply, if economic growth in emerging markets (other than Turkey and Argentina) continue to match or exceed economic growth projections, or are just not as horrendously bad as markets are currently pricing them, there stands to be an impressive rally in Emerging Market securities and currencies. Timing markets is hard and inadvisable, but long-term investors can use situations such as these to buy oversold assets and patiently wait for them to recover.

Last month we highlighted our top equity holding Largo Resources. We are very pleased to report that Largo shares delivered a staggering +44% return in August. Our bullish thesis continues to be confirmed by higher vanadium prices. We have also started to buy back some of the technology holdings that we sold in July. Our colleague portfolio manager Kaspars has done a great job following the developments of the E-gaming business and his chosen company – Activision – has performed very well since we began buying it back last month.

In other news, in August, I was surprised and humbled to be named one of the “Top 30 Creative People in Business” in Latvia by “Kapitals” magazine – Latvia’s foremost business publication. An honour such as is this is only possible if you are challenged on a daily basis by talented and hard-working people, and I am very thankful to our BlueOrange team for their encouragement and support. I am also very thankful to our leadership team and shareholders at BlueOrange for trusting us to build an asset management business from the ground up that puts clients first, encourages new ideas and innovation, and has the patience to invest in ideas that generate superior growth. We are only getting started!

Speaking of our team here at BlueOrange, last month we said good-bye to our analyst Krista. Krista started with us as a summer intern two years ago and grew to become a very important member of our team, even though she was studying full time and was winning World Aquabike championships in her ‘free time’. We wish her the very best in her new chosen field!

Thankfully, our new team member Polina has attacked our very steep and demanding learning curve with determination and persistence, and we are very happy that she has chosen to join our team!

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

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OUR MARCH RESULTS

OUR MARCH RESULTS

Our weighted average return in March was -1.94%. Since 2015, we have generated a net return of +33.05%.

In terms of investment strategy performance, our weighted average net returns for March were (a) -0.61% for conservative strategies, (b) -1.60% for balanced strategies, and (c)-3.37% for aggressive strategies.

Financial markets continued to experience significant volatility in March and no sector was spared.

The prospect of global trade war, coupled with heightened tensions in Syria meant waking up every morning to new headlines that sent markets into tailspin or euphoria. By the end of the month, ‘tailspin’ had gotten the upper hand.

We cannot control world political events or censure the tweets of powerful individuals.

However, what we do offer is a steady hand and a sense of perspective when irrationality is running rampant.

Last month we wrote that “The primary instigator for February’s sell-off was higher inflation, which was signaled by a better than expected average hourly earnings data on February 2nd.”

Well guess what? In March, this same data point came in lower than expected and showed that US wages were only growing at 2.6% year-on-year as opposed to the 2.9% that was reported in February. No matter. The market had found its reason to panic and data to the contrary was no reason to stop acting hysterically. Thankfully, chaos generated from news headlines plays into the hands of experienced portfolio managers, and even though volatility is tiresome, it does create opportunities that lead to superior performance in the long-term.

One positive of note is that the rise in interest rates since the start of the year means that yields on high quality USD bonds have become interesting once again, which serves to benefit conservative investors.

In spite of all the market volatility, our sales staff had their best ever months in February and March, which means that we were able to invest new client funds at attractive price levels. Congratulations to Andrejs and his team. You are doing a brilliant job!

In April, we have seen very strong earnings fueled by an expanding global economy and the Trump corporate tax cut. US sanctions on Russian industrial titans has made the world take deeper consideration of commodities and their availability and has sent base metals prices higher. We have been patiently waiting for this sector to attract more attention and have been pleased how our chosen investments have performed. As I write this commentary, we have already more than made up for March’s negative performance results.

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!
Pauls
FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.

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