Dale Hubber-Richard, Cannon AM (DHR): The transformation over the past 12 months in perceptions of the macros is dramatic. We also had the Brexit vote upcoming. Who knew what was going to happen there? Then we had the US elections with this implausible candidate. Some really seriously underestimated those political events.
Even after the election of Trump, most people expected markets to fall and they climbed. Later this year we have German, Dutch and French elections. In 12 months’ time, our perceptions could quite considerably transformed by events.
GC: What are your views on the US from an investment point of view?
GW: We went underweight equities after the Brexit vote, massively underweight Europe and put that money into emerging markets, equity and debt. There is an undervaluation and a growth story there.
Following the US election, we reduced our overweight to emerging market equity and put that back into the US and Switzerland as a defensive market, more in small/mid caps rather than large cap. We are neutral, maybe a little overweight US equities now.
MP: For us it has definitely crept up, more from a sector perspective rather than just plain vanilla index tracking. Healthcare looks cheap to us. There were big concerns in the run-up to the election and complete capitulation in this sector in October. The growth dynamics are still there and have been for the best part of a decade.
GW: After the year we had last year, clients are becoming aware that it is really important to remain diversified across asset classes. Think about the divergence of returns in sectors last year. Because of all the political events, we saw a mean reversion trend, from growth to value.
If you are on the wrong side of that trend, you get caught out. If you are nicely diversified, with good funds and managers with no particular bias, you cover all bases.
SM: We tinkered at the edges in terms of natural asset allocations and de-risked a fair bit. We took money out of long-only equities and put money into long/short equities from 2015 into last year.
From a fixed-income perspective, we were positioned way too early for what eventually happened. When you look at what has happened to bond markets since they turned around in August, there have been some pretty lumpy moves in headline indices.
The moves we have seen in government bonds, treasuries and gilt indices have actually been bigger than the ones we saw in 1994, the annus horribilis for bonds.
