Tim Stubbs, Investment Manager
Posted in Fiducia News on 11.03.16

February proved to be a tale of two halves within financial markets. Extending the trends seen in January, the Gold price surged as market participants continued to seek refuge in safe haven investments; weak sentiment continued to weigh on global financial markets during the first half of the month.

As markets hit their year-to-date lows on the 11th of February, it was notable that the Gold spot price increased by 4.6% on this day alone. This date represented something of a localised epicentre in dismal financial market sentiment – which is very often the case at local market troughs. At these moments of despair, it is often the time for bargains to be had.

Since then, the second half of the month has been characterised by far more positive trajectory; stock markets have staged a relief rally of almost 10%, and demand for safe haven assets has cooled somewhat (although the graph below is unable to highlight the difference between the weak first half to the month and the more positive second half). Over the period as a whole, it is notable that more defensive investments, such as Gold, Bonds and Infrastructure fared well.

Critically, oil prices have seen a rise over the month, potentially marking a key turning point both for Crude itself and for financial markets generally.

The oil spot price also bottomed on the 11th of February, before rallying by over 20% to month end as key OPEC nations and producers agreed in principle to fix output levels in an attempt to stabilise prices. The potential for a floor in oil prices consequently invites stability for many Emerging Nations, and to a large extent for risk sentiment generally in financial markets if one of the key sources of recent uncertainty could potentially be eliminated.

We are also watching financial markets closely for further signs of stability and of a relative rotation between Value and Growth stocks. In recent years, investors have preferred the perceived safety of stable, expensive stocks at the expense of those companies with cheaper share prices but less certain outcomes. We are watching this development carefully; it could potentially represent the opportunity for out of favour, cheap areas of the market to potentially offer stronger returns going forwards if confidence in owning such assets picks up. Within the UK, for example, we have been adding to our positions in UK Defensive Large Cap stocks – typical FTSE 100 holdings – as we believe this area of the market looked to be oversold and represents good value for those who are able to take a longer-term investment horizon.

Tim Stubbs, Investment Manager
Posted in Fiducia News on 11.03.16