Warmest greetings on this our first communication in the Year of the Rooster! As we welcome you in this brand new lunar year, we also welcome the possibility of new populist political movements gaining momentum around the world, particularly in Europe. Watch: How Populism is reshaping our world.
Since the beginning of last year it has become increasingly necessary for us to invest client money not only according to economic, business and accounting fundamentals, but also to take into account the political variables and uncertainties which have played an ever increasing role in our analysis models.
Our tactical allocations based around the policies of the Trump administration have been the best performers over the past 3 months. Our allocation to US banks through the Financial Select Sector SPDR® ETF has returned 21.88% over that period, benefitting mainly from the new government’s willingness to remove post-’08 regulations on banks, as well as increases in earnings and net interest margins. Our allocation to Russian companies, as a result of the new government’s platitudes to cozy up to Vladimir Putin, and the nomination of Rex Tillerson as the US Secretary of State, are incredibly tantalizing. Combined with the OPEC oil production cut agreement we have been enticed to buy holdings in the VanEck Vectors Russia ETF & HSBC GIF Russia Equity AC fund, which have returned 22.9% & 24.22% respectively over the past 3 months.
The rise in political uncertainty, specifically in Europe going into 2017, kicks off with the French presidential election on 7 May. Isolationist and anti-EU candidate, Marine Le Pen, is performing well in the polls, and poses another threat to the future of the EU. Combined with Donald Trump’s increasingly ambiguous attitude towards free trade and his comments regarding the negative impact of a stronger US Dollar on the US economy, we find it necessary to continue to hold onto gold, through the db Physical Gold ETC & Pictet Physical Gold fund, which have both returned 6% + this year. Gold provides a hedge against political uncertainty and US Dollar weakness, as it is seen as an alternative currency and the ultimate safe-haven.
Please take some time to have a look at the new product offerings we have added to our platform over the past month below, including: property in London, private high-yield debt via fintech platform as well as the launch of our Premium Managed Account service.
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Tenzing Pacific Investment Management