CIO Monthly View with Will Bartleet, CIO and multi-asset portfolio manager at Pacific Asset Management
Brexit negotiations dominated the returns for Sterling investors in October as the Pound bounced on the hopes of a deal between the UK and Europe. In a month of high drama in UK politics, Parliament voted through Prime Minister Johnson’s deal but voted down the government’s attempt to push through the deal before 31st October. Whilst the end game remains highly uncertain, the reduced likelihood of a no deal Brexit led to a rally in Sterling against all major currencies.
In the US, President Trump shook hands over phase 1 of a deal with China after months of disputes. It remains uncertain whether a comprehensive deal between America and China can be reached.
Equities fell in Sterling terms as the rise in global stock markets was more than offset by the fall in currencies against the Pound. Jupiter Special Situations significantly outperformed over the month as deeply undervalued UK stocks rebounded on the hopes of a Brexit deal. In overseas markets, US equities underperformed whilst globally, value stocks continued to outperform their more highly priced peers.
The Federal Reserve cut rates for the third time in 2019, as was widely expected by the market. However, some commentators, notably President Trump were “disappointed” at their indication that this would mark the end of the “insurance cuts”. Meanwhile in Europe, Mario Draghi oversaw his final meeting of the ECB as President before handing over the reins to Christine Lagarde. In the UK, gilts fell as investors discounted the probability of a hard Brexit which had threatened to see the Bank of England cut rates to support the economy. Finally, Diversifying Assets such as alternative risk premia were a useful source of returns in a month where both equities and bonds fell for Sterling investors.
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