As we hurtle towards mid-Summer, equity markets are in a breezy, Summery mood indeed. It seems prudent to first start in France where Emanuel Macron’s solid win in assembly elections seemed to shore up support for a reformist wave of “Macron-omics” and a pro-European agenda. This week also marks the one year anniversary of the momentous BREXIT vote in the UK, and negotiations post the trigger of Article 50 are kicking off in Brussels with a potentially weaker UK hand post the surprise election result there. Both of these developments have cheered equity markets in Europe, and the enthusiasm has been contagious.
This week both the S&P and Dow are touching record highs, and the USD and oil are also higher. Growth has dominated value as a style all year and this month is no exception. 2017 has also seen the welcome reversion to the mean of non-US equity performance, which is rewarding for those institutions that have already taken the lead on global diversification, but may have been awaiting the results. Last week’s Fed move on interest rates only added to the cheer, as its continuation of the “communicate well and often” strategy is proving soothing for investors.
The fixed income “ballast” in portfolios is not a negative drag this year (up on average between 2 – 3% year to date) but it will not pay the bills either, while unconstrained managers continue to show reasonable divergence as they grapple to find strategies in which they can add value.
Last week’s news of Amazon’s bid for Whole Foods at a premium of over 20% and its first significant push into the bricks and mortar sector was another siren call for the disruptive forces that are changing the way we shop, eat and travel. One manager we follow that is exclusively focused on disruptive technology has delivered over 30% year to date. It is a year in which disruption is being embraced and perhaps overbought – lest the investor misses the boat again perhaps.