Markets in a nutshell — February 2021

Global equities rose on optimism that improved vaccine distribution would accelerate 2021 global growth, but was partly offset towards month-end by rising bond yields on fears that more stimulus and supply constraints would stoke inflation.
 
The US market rebounded from January’s pullback and continues to seesaw on news flow surrounding the US stimulus package and pace of vaccination roll out a backdrop of rising bond yields. European bourses gained on stronger factory activity despite the services industry still hurting from stringent COVID-19 lockdowns. Emerging markets underperformed, hurt by rising US bond yields.
 
Sector gains were led by cyclicals energy, financials, communication services, industrials and materials, while the more defensive sectors like utilities, healthcare and consumer staples lagged.
 
Developed market bond yields increased markedly as markets started to discount rising inflation expectations. Fed Chairman Powell was nevertheless dovish, emphasising that the US was still far from its employment and inflation goals and reiterated that tapering discussions were premature. The US dollar strengthened against the euro and Japanese yen, while weakening against the British pound, however, the dovish Fed and improving global economic environment should weigh on the dollar in the medium term.
 
The Brent crude oil price rallied above $65 per barrel as winter storms disrupted Texan production and continued vaccine roll outs raised prospects of rebounding oil demand. Industrial commodity copper continued to rise on expectations for accelerating global demand growth in 2021. Gold and silver declined as central banks continued to downplay inflation risks.
 
The Foord Global Equity Fund outperformed again, driven by copper miner Freeport-McMoran, Baidu and Alphabet despite portfolio hedges weighing on returns. Indeed, the Foord Global Equity Fund has gained 78.6% vs. the benchmark MSCI ACWI of +68.0% since the March 2020 lows to show alpha over all periods up to five years.
 
The Foord International Fund was flat over the month with the fund’s hedges against expensive US equity markets detracting from performance as the S&P 500 index scaled all-time high. Copper miner Freeport-McMoran contributed most to fund performance with Chinese internet giant Baidu, Wharf Real Estate and Wynn Macau also contributing meaningfully.
 
The managers continue to favour equities over other asset classes but remain cautious and partially hedged given lofty US equity valuations. Both funds are finely balanced between capital preservation in the near term and meaningful inflation beating returns over the longer investment horizon. In our view, the funds are exceptionally well positioned for the unfolding environment.