This week's update comes from the advisory investment team in Guernsey
In a market characterised by large personalities, it is the fall of a star fund manager, Neil Woodford, which has had the papers clamouring for comment this week. The cataclysmic fall from grace has been of Woodford’s own making; although his historic performance has been nothing short of sparkling, it is his recent performance which has continued to lag his peers that has caused his investors to lose patience. Heavy outflows, coupled with some speculation of the public listing of previously un-listed positions, have led to Woodford having to gate his flagship fund. This saga has reminded us that proper fund selection and review is key to investing in a fluid market.
This past week the market was buoyed by macroeconomic factors, US markets rallied off the back of Jerome Powell (chairman of the Federal Reserve) being more accommodative to a potential US rate cut. The US economy reported a soft unemployment release as it added 75,000 jobs in May, holding the employment rate steady at 3.6%. The statistics have led some to question whether the momentum in the labour market has been curbed as tail winds from tax cuts and The Jobs Act dissipate. The People’s Bank of China also reacted during the week in support of reflationary policies to boost domestic demand. These policy changes come as the trade war with the US continues to deepen, a situation that has caused a cool down in global markets and creates some concerns around the delayed global impact and potential subsequent possibility of entering a recessionary environment. Another, albeit somewhat smaller trade war, is erupting in Mexico as Donald Trump continues to threaten a 5% tariff on all Mexican goods. The duty, which is tiered, will continue to rise to 25% unless Mexico curbs illegal migration to the US. President Trump is pushing a hard bargain to try and find a mutual agreement into building ‘The Wall’. That being said, the market reacted positively amid optimism that these tariffs would be delayed.
Trade war concerns to one side, Prime Minister Theresa May hanging up her leopard print shoes has led to a deluge of Conservative Party candidates for leader. The bun fight that has ensued has been unsurprising to say the least, given such a split party. It would seem that Boris Johnson has been billed as the favourite to succeed Prime Minister May with Mr Gove and Mr Hunt following closely in his wake. Although arguably all three candidates have not covered themselves in glory in both past and present events. This vote will lead up to the ‘long stop’ deadline of 31st October 2019 for our official withdrawal from the EU. I know what you, the reader, is thinking… we’ve heard this all before right? Needless to say the market is not placing an over-optimistic wager on the UK’s withdrawal from Europe and thus the domestic market continues to lag the performance of the broader global markets.
At Ravenscroft, we believe that there are still pockets of value that remain embedded in the UK market, and would be an advocate for UK PLC as part of a well-diversified global portfolio.