Making Money! ICP Model Portfolios. Latest Results – June

By Monday July 10th, 2017 Investment

Volume 1 Issue 2


Global Equities

Several EM countries, including Nigeria, Mexico and Taiwan were among the best performing equity markets. Qatar, South Africa and Russia were among the worst performing as Qatar’s dispute with other GCC countries dragged on and falling commodities prices (exacerbated by China credit concerns) caused investor nervousness.

Global Fixed Income

Interest rates in many developed markets rose sharply over the month as several central banks displayed more hawkish sentiments. Philippines, Mexico and Brazil performed best as they were already high-rate countries that attracted some global yield hunting. Canada, Qatar and UK were among the worst performing markets.

News

Americas   Budgetary disputes and adverse court rulings in some US states have the potential to shut down their municipal governments and invite credit rating downgrades.   All major US banks passed the Fed’s latest round of stress tests. The Fed’s Yellen and Fischer both made comments about asset prices being expensive leading many to believe that the FOMC will continue its tightening trend. Brazil’s President Temer was charged with bribery, but this had been expected and the market rallied in the last week of the month.

EMEA   ECB’s Draghi gave a speech interpreted as meaning the bank might cut back on asset purchases. BoE’s Carney possibly reversed his stance that there would be no near-term rate hikes by saying the bank will now debate the need for one. The status of UK’s Brexit from the EU continued to be put in question, as the EU has demanded that the terms of exiting be settled before any new trade agreements are negotiated. Also, some in Brussels are demanding harsh concessions by the UK for allowing the country to leave the bloc. Complicating matters, Prime Minister May was in danger of losing the confidence of parliament after her party’s poor showing in the recent snap election. Inflationary pressures remained tame in most of the developed markets and Eurozone inflation fell slightly in June, remaining well below the ECB’s 2% target.

Asia   MSCI reached a decision to include some of China’s domestic A shares in the emerging market index.

Commodities

Copper was up moderately in June, but crude oil fell further. Oil did however rally and cut some its losses at the end of the month.

Model Portfolio

Nigeria, Taiwan, US and Mexico were the biggest equity contributors in the month, while Qatar, UK, South Africa and Russia were the biggest detractors. China, Philippines, Mexico and Brazil were the biggest bond contributors, while Argentina, US, Egypt and Germany subtracted the most from performance. An overlay applied from the beginning of the year, cutting the US’ equity weight, raising its bond weight and otherwise adding to EM broadly has begun helping performance.

Comparative performance for the month ending June 30, 2017:


Cumulative YTD Returns

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