In April the fund was down -1.98%. We had positive performance from our holdings in Greece and South
Korea, whilst the main detractor was China. At the sector level Communications and Financials were positive whilst Energy and Consumer Discretionary were weak.
Dissecting the cause and effects of what happened in April 2025 is a truly complex endeavour, more appropriate is an analogy – it was ‘tangoed’. This isn’t a reference to the shape of a futures curve or an Argentine dance (although this does have some similarity), it’s referring to the iconic 1990’s advert for a
fizzy drink.
Featuring a surreal orange-painted man that appears out of nowhere, gives an unsuspecting consumer a slap across the face in symbolic reference to its zesty flavour, and closes with the tagline “…You’ve been Tangoed” (Googleable).
The process of discombobulation of counterparties before a negotiation has now become predictable, but this was the first time it was directly felt in markets that were loaded with shadow leverage. Whilst volatility is something we’re perfectly familiar with, and can be useful when appropriately positioned, the difficulty in this instance hasn’t been market volatility but policy volatility.
Following the ‘flash crash’ these rapid changes have significantly increased the margin of error in forecasts,so it’s understandable that investors have become ‘E’-centric. If there’s visibility on earnings, it’s resulting in some impressive price performance.
This is one of the reasons why Communications has been our preferred sector of late and produced our best performing stock last month – a Latam mobile operator that gained 17%. We used the weakness to add to positions such as Millicom, Hong Kong Land and the Greek retailer Jumbo, which is likely to benefit from greater buying power with Chinese suppliers and lower logistic costs. We also used the weakness to enter new positions in Latin America and other areas less impacted by tariffs.
Whilst we are now in a holding pattern as negotiations continue, we can observe some meaningful rotations. First the US$ has clearly broken trend and, unlike in other growth or geopolitically triggered ‘crises’, has continued to weaken. The full spectrum of fiscal, debt and monetary policy issues have now been compounded by the growing perception that the administration is ambivalent at best about a weaker dollar, especially relative to mercantilist Asian currencies.
In commodities there’s an ironic alignment of interests in the oil market. Trump wants lower prices but higher US production, Saudi wants higher market share and compliance, both likely secured through lower prices. Whilst a weaker dollar and increased Central Bank demand is continuing to support non-fiat assets such as gold and now some indication that it’s moving into other metals such as platinum. All of this and more is helping turn the tide of global flows. It’s looking increasingly likely that America reached an all-time peak of 67% of the MSCI All Country World Index on 24 December last year amidst apexing talk of “American exceptionalism”.
This should of course be supportive for EM assets especially those unaffected by tariffs or those ‘inside the tent’ that could even benefit. The impact of tariff volatility and uncertainly will wane as the efficacy of the negotiating style has a half-life, but the direction of travel is increasingly clear – It’s not just emerging markets that are ‘rebalancing’, it’s now a global trend.
