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29 Jan 2018

THE YEAR IN REVIEW

Politics has always impacted financial market outcomes, but in 2017 the effects were particularly acute. This dynamic was not isolated to any specific region but was manifest across the globe, perhaps indicating an inflection point in the world order. NICK CURTIN reviews the major events and market outcomes of 2017.

Global equities (+24.0%) had a blistering year, achieving a clean sweep of successive positive monthly gains and standing out for its low volatility and broad gains across markets and sectors. Share markets started the year with strong tailwinds, after Trump’s surprise US presidential election victory late in 2016 heralded a period of fiscal expansion. The rally soon tired, but emerging evidence of accelerating, synchronised global economic growth boosted equity markets as valuations were increasingly justified by rising earnings expectations.

Investor sentiment was quickly buoyed by receding European political risks, pro-EU election outcomes in the Netherlands, Italy and France and increasing expectations of a softer Brexit result. Offsetting this, US–North Korean tensions mounted as the year progressed. Latterly, markets gained on the legislative advance of Trump’s aggressive US tax reforms, tempered to an extent by signs of a revival of his anti-China trade rhetoric.

As growth gathered momentum, monetary policy gradually tightened with the US Federal Reserve making three quarter-point interest rate increases. Surprisingly robust European growth and inflation also portends more hawkish European Central Bank policy. Bond yields started to rise later in the year in expectation of rising inflation and interest rates as the global economy continues to gather pace. Indeed, our base case expectation is for 2017/2018 to mark the end of a multi-decade bond market rally. On balance, the funds‘ bias towards select global equities was prescient and well rewarded.

Foord Asset Management Singapore and the Foord Global Equity Fund achieved their fifth anniversaries last year. The Foord Global Equity Fund has had a stable multiple-counsellor portfolio team under Dave Foord as Chief Investment Officer for the last three years and it has achieved very good performance results in this time. The Foord International Fund continues to be managed by Dave Foord and Brian Arcese with no changes expected. And, as always, a highly skilled team of investment analysts supports the portfolio managers.

 

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