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07 Jan 2022

Markets in a nutshell — December 2021

Global equities were buoyed by signs that the highly transmissible Omicron COVID-19 variant appears to be substantially less virulent than previous variants. Optimistic investors rotated back into more cyclical European markets, despite lockdowns across several EU countries while the tech-heavy US market underperformed.

Emerging markets also rose but fared worse than their developed market peers as continued regulatory pressure and property developer worries weighed on Chinese bourses. Energy-centric Russian markets also declined, despite a sharp increase in the dollar oil price.

All sectors bar consumer discretionary finished the month higher led by utilities, consumer staples, real estate and healthcare. Consumer discretionary underperformed but was only marginally negative.

Interestingly, the US 10-year bond yield was little changed despite indication from Fed Chairman Powell that retraction of current policy stimulus would happen faster than expected. An acknowledgement that inflation is likely to be more persistent than previously thought (the Fed dropped the much talked about word “transitory” from its communication) also had little impact on bond yields.

Industrial commodities copper, iron ore and oil rebounded as investors re-engaged with economically-sensitive cyclical commodities. Precious metals, silver and gold, also rose with negative real interest rates decreasing the opportunity cost and increasing the attraction of holding them as an alternative store of value.

The Foord Global Equity Fund underperformed the index, driven by allocations to the consumer discretionary and communication services sectors. The holdings in Chinese tech names more than offset the positive contributions from companies in the materials sector.

The Foord International Fund delivered solid absolute returns with the investment in leading US managed care provider, CVS, contributing the most to performance. The fund’s prudent risk mitigation hedging positions on the relatively expensive S&P500 detracted from performance in the rising market.

The Foord funds have not performed as well as their respective peer groups in 2021 but are within a reasonable range of expectation given the prevailing, cautious strategic positioning. Investors are reminded of the powerful long-term compounding effects of protecting capital through periods of market volatility (demonstrated most recently through strong relative returns in 2020). Foord investors’ returns should trend to the top of the relative performance tables in the fullness of time.

The funds are exceptionally well positioned for the uncertainties and opportunities that lie ahead.

 

 

Insights

09 Dec 2021

Markets in a nutshell — November 2021

The new and potentially more transmissible Omicron COVID-19 variant latterly weighed on global equities, with the tech-heavy US bourses outperforming. European stocks underperformed on waning economic recovery…

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08 Dec 2021

The commodity theme

Commodity prices are rising and likely to rise faster than the level of inflation going forward. In this podcast Dave Foord discusses Foord’s interest in new commodities such as copper.

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