That said, Stammers admits there are rare opportunities that arise from short-term events –certainly during periods of turmoil – and one of his mantras is “bad days make good entry points”.
“If we do see something take a real hit that will trigger the questions: has it been hit too hard, too fast? Is there a good reason to invest or do we want to run for cover?”
European Wealth has taken two short-term positions so far this year, in oil and Russian equities in mid-February, and it took profits of 25-30% a few months later. But that was a more opportunistic move than the firm would normally make.
Meanwhile, the strategist says he is the first to admit he has been too defensive in the fixed income space: “We felt bonds were too expensive for some time. We moved much shorter-duration and with hindsight it paid to be a bit further out. Sometimes you get things wrong.”
Home and away
The firm has a historical underweight to UK equities, which was initiated prior to the last general election in the UK. “We had a lot of dollar exposure and a lot of international exposure, so when Brexit kicked off we found ourselves in a good position. In fact, we were able to sail through relatively unscathed,” says Stammers.
In terms of where the team goes from here, Stammers believes some of the concerns in the UK have been overdone, and the rebound of the FTSE suggests as much. In the medium term, more of the firm’s focus is on what is happening in China and the US growth story.
The team decided to raise its cash level to create a buffer in uncertain times, as well as to deploy on short-term investment goals.
Says Stammers: “We brought in a bit of exposure to silver as well as increasing our gold positions and equities in mining companies – partly as a hedge and partly as an opportunity – because we think there is further to go. We are looking at our exposure in the equity markets overall and slightly repositioning that.
“We have been overweight Europe for a while but we took out about two-thirds of our European money.”
That money was then partially used to fund the increased allocation to precious metals. The remainder was used to reweight slightly towards US small and mid-caps.
“We have been underweight large-caps for a while as we’ve been very disappointed with the outlook for the earnings of US large caps, which have been pretty static and uninspiring. There are basically better opportunities elsewhere,” Stammers explains.
“The rise in the dollar did not make the case for that situation to change very much,” continues Stammers.
“That said, the US is still delivering growth, but we want more exposure to US consumer, domestically focused small and mid-cap US equities where there are better returns, plus it has that dollar component.”
Stammers deems it fairly unlikely there will be a significant weakening of the dollar against sterling. “The majority expectation of having a reasonable degree of dollar exposure remains prudent,” he says. “So we’ve upped that from our existing position.”
