Making Money! ICP Model Portfolios. Latest Results – August

By Tuesday September 5th, 2017 Investment

Volume 1 Issue 4, August

Global Equities

Global equity markets were mixed with some emerging markets the best performers (Russia +7.6%, Poland +6.0%, Chile +5.9%, Brazil +5.8%) and others as the worst (Pakistan -10.2%, Qatar -7%, Philippines -1.8%). Major markets (US +29bp, Japan -9bp, Germany +16bp) were little changed in August but recovered from earlier losses mid-month. VIX was higher compared to July’s record lows, but is still at historically low levels.

Global Fixed Income

Long rates compressed globally, with double digit drops in some of the larger developed markets (US -14bp, Switzerland -18bp, UK -17bp, Germany -16bp), but rates in many emerging markets fell as well (Indonesia -23bp, Qatar -21bp, Thailand -14bp, Russia -8bp). Ten year treasury rates rose noticeably in only a handful of countries (Nigeria +43bp, Greece +13bp, Spain +10bp, Chile +8bp).

News

Americas   US Q2 GDP was revised higher, to 3% from an earlier estimate of 2.6% and was driven by robust capex and corporate profits. The August US jobs report was slightly weaker than expected but considering the impact of the seasonality of late summer, had little impact on markets. Hurricane Harvey caused extensive flooding and damage in Houston as well as across a broad swath of Texas and Louisiana.

EMEA   Germany’s Angela Merkel agreed with France’s Emmanuel Macron that Europe needed an EU finance minister. However details remain thin on what responsibilities would fall to such a new appointee and what would remain in the dockets of the finmins in individual countries. Meanwhile, Merkel prepared for the only televised debate against her primary opponent Martin Schulz, whose party she will contest in the September 24 federal election. Arguments between the UK and the EU heated up during Brexit implementation talks, with chief EU negotiator Michel Barnier making comments to the effect that he wanted to teach the UK a lesson over the significance of leaving the Eurozone. European PMI showed strength in the month.

Asia   Tensions in the region remained at a high level, following missile tests by North Korea. One missile flew over the northern Japanese island of Hokkaido and drew condemnations from the US and Japan as well as warnings from China. 

Commodities

Despite about a quarter of US refinery capacity being offline in the wake of Hurricane Harvey, oil was down about 8% in the month. Base metals continued their recent strength.

Model Portfolio

Equity portfolio best contributing markets were dominated by emerging markets, including Russia (+12bp), China (+12bp), Poland (+11bp), Chile (+10bp) and Brazil (+10bp). Qatar (-12bp), UK (-4bp) and South Korea (-4bp) subtracted the most from performance.  Developed markets, led by the US (+38bp), Germany (+5bp), UK (+4bp) and Japan (+4bp) were the biggest contributors to the bond portfolio in the month, while the largest detractors were Nigeria (-3bp), China (-2bp), Spain and Korea (-1bp each).

Comparative performance for the month ending August 31, 2017:

Comparative Year-to-Date performance:

Leave a Reply