Markets in a Nutshell — December 2020
Developed market equities again reached new highs on the first COVID-19 vaccine approvals by US, UK and EU regulators and the passage in the US of a $900 billion pandemic relief bill. Despite accelerating COVID-19 infections the US equity market gained in anticipation of a better 2021 given the vaccine roll outs and potentially more stimulus under the Biden administration. European bourses also rose on the 11th hour Brexit trade deal, which helped avoid trade friction and others issues related to a no-deal Brexit. The start of the EU vaccination drive also heralded a possible return to normal in 2021.
Improving global economic sentiment propelled emerging markets higher with commodity exporters Brazil and Russia leading the pack, boosted by increases in underlying commodity prices including oil and iron ore. China underperformed on concerns about government antitrust investigations on Chinese internet companies.
Developed market bond yields diverged modestly with European sovereign yields declining on reaccelerating COVID-19 infections, while US yields edged higher on a modest improvement in US employment and the COVID-19 vaccine approvals. The US dollar continued to weaken against most major and emerging market currencies while industrial commodities oil, copper and iron ore rose on expectations that production, distribution and uptake of COVID-19 vaccines may be enough to curtail the pandemic and accelerate global growth in 2021. Precious metals gold and silver rebounded after three months of retreat.
The more cyclical materials and information technology sectors led the markets higher, while defensive real estate, utilities, industrial, consumer staples and communication services underperformed.
The Foord global funds continued to deliver market leading returns. The Foord Global Equity Fund ended the year up 24% in US dollars, a full 8% ahead of the MSCI All Country World Index benchmark. The fund is now in the top quartile of its Morningstar peer group over 3, 4 and 5 years and top decile over 1 and 2. Fund performance in December was supported by strong contributions from Baidu, Moncler and Freeport-McMoran while Akebia Therapeutics, Hornbach and Health & Happiness detracted at the margin. The Foord Global Equity Fund is reasonably fully invested, with the managers maintaining some liquidity to exploit opportunities that any market volatility might present.
The absolute return oriented multi-asset class Foord International Fund also ended the year on a high note comfortably ahead of both its US inflation plus 5% target and its relevant Morningstar peer group average. In December, UK utility SSE PLC and Hong-Kong property developer Wharf REIC contributed the most to performance while Chinese insurer PICC Property & Casualty detracted. The managers of the Foord International Fund continue to favour equities over other asset classes. Mindful of elevated equity valuations, however, the managers also hold cash, precious metals and a modest derivative position to hedge against a potential market retracement.
The funds are well diversified and optimally balanced between protecting capital against elevated market risks and capturing the long-term inflation beating investment opportunities that we can see.