Equities

Portfolio Thinking

How much sugar is in your sugar?

Soviet-era Polish cinematography is often a source of seemingly absurd catchphrases repeated for generations. “How much sugar is in your sugar” is a classic one from the quirky professor in the 1973 comedy Man-Woman Wanted. When we target particular factors within our equity exposures, I increasingly find myself taking on the role of the professor as I try to answer the question “How much factor is in my factor?”. It might seem like an odd question but we can answer this by relying on simple factor definitions and a holistic approach to combining factors. It’s only once we know what our true exposures are, that we can consider how we avoid any unintended secondary exposures that have the potential to sour the overall outcome.

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Strategy

Driving into uncertainty

A few weeks ago Emiel showed us a photo of his Panther Kalista classic car. Not to be outdone, I’m including a photo of my car, a Nissan Leaf. It may have less character, but if the Panther is a reminder of car history, the Leaf could provide a glimpse of the car future.

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Strategy

Show me the money

One thing is for sure, the US economy is closer to full employment than it was a year ago. More difficult to say is whether it is at full employment. So far we’re still lacking much evidence that US wage growth is picking up steam. However, much like a tube of toothpaste being squeezed a little too hard, wage growth can suddenly accelerate when labour markets are tight. So from an equity investor’s perspective it’s better to think about the potential impact of rising wages on profits before it actually happens.

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Strategy

Everything you need to know about: Q2 earnings

The Q2 US reporting season is upon us. It’s a busy time for equity investors, though earnings seasons rarely move the needle much from a macro perspective. Here is a quick-read primer of what to expect over the next few weeks and my two key top-down conclusions.

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Macrobites

The cajoler-in-chief

President Trump's approval ratings after his first 100 days in office make for grim reading. As markets question the ability of the White House to get its own way, we've seen a significant retracement in the "Trump trade" in both equities and fixed income. The President needs to become the cajoler, not just the commander, in chief to revive hopes of a large fiscal stimulus.

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Portfolio Thinking

The sterling reputation of UK equity funds

Spring has sprung but for many investors and financial advisers there’s still a chill in the air. The performance of UK active managers is once more in the spotlight and yet again threatens to reignite the active versus index debate. This time it is S&P Dow Jones which highlighted that nearly nine out of ten UK equity funds sold in Europe lagged behind their benchmarks in 2016.

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Strategy

Weightless

The investment world seems to be collectively listening to ‘Weightless’ by Macaroni Union. The S&P 500 has not had a single day of losing 1% or more since Donald Trump’s election, realised volatility is near long-term lows and global equities are up almost 6% in only the first two months of the year. Not that I’m complaining, but what’s going on?

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