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Date: November 13, 2017
Over the last year I have been honoured to serve as the Chief Investment Officer of Frenkel Topping Investment Management, being tasked with the incredibly important job of preserving your capital, outperforming inflation after costs and protecting you from the volatility of financial markets.
The DNA of Safety First has always been to first preserve and protect your capital. We are never afraid to move out of markets and to transition to one hundred per cent cash, when there is a global event that could give rise to unpredictable volatility. Safety First’s incorporates a vitally important benchmark unconstrained approach, which is a crucial investment tool available to enable me in my capacity as Chief Investment Officer to protect your capital from the dangers posed by uncertain markets. Safety First’s purpose is to deliver a smooth investment experience, where volatility is managed in a way that preserves capital over the longer term. As Chief Investment Officer, it is my responsibility to navigate Safety First through the potential dangers posed by any number of geo-political or macro-economic events, which appear to be occurring ever more frequently.
Here you will find a year book of Chief Investment Officer’s weekly newsletters enclosed that covers my thoughts over a tumultuous investment year, which I hope you find of interest.
Date: November 13, 2017
On Monday 6 November 2017, I took the decision to move all our Safety-First portfolios to 100% cash. Since I launched our Safety-First range of portfolios I have taken them to 100% cash several times to dampen volatility and avoid geopolitical risks where those risks were foreseeable. It is a unique approach which has served our clients well. Even our most adventurous Safety-First portfolio has less than [5%] volatility throughout 2017, protecting and preserving our client’s capital – our first priority.
We avoided the volatility and potential losses of Brexit, the US elections, the European elections and other geo-political events through 2017.
We are now perfectly positioned to redeploy our client’s capital as asset classes find lower levels and global macro risks recede. If that does not happen in 2017, we have locked in strong risk adjusted returns across all our Safety-First portfolios for our clients.
Date: November 7, 2017
There was no shortage of potential catalysts for investors this week. However, the response was relatively muted as things turned out to be as per expectations. Fed stayed, indicating a hike in December, BOJ kept on hold while the BOE, though pursued a rate hike as per consensus, the dovish tone resulted in GBP selloff, falling 1% to $1.31.
Federal Reserve officials reinforced expectations for a December interest-rate increase by subtly upgrading their assessment of the US economy while staying on hold this month. Pricing in federal funds futures contracts implied an 85% probability of a quarter-point move next month.
Date: October 31, 2017
The ONS on Friday morning, 27th October 2017 released the provisional data set for ASHE 6145 & 6146 (6115 equivalent). This is the second year in a row that the data has been made available before mid-November. This will certainly help with the recalculation process for all Periodical Payments due to be paid on or before 15th December 2017. The noticeable headline for 2017 is the fact that from the 70th percentile the % increase in median wages has not been as high as the rate of inflation measured by both RPI and CPI. Having spoken to the ONS I have confirmed that that the 12 month increase for these measures of inflation are 3.9% and 3.0% respectively.
Date: October 31, 2017
In the US, as investors witnessed the busiest days of the earnings season at the same time the political wrangling in Washington persisted at a breakneck pace. House Republicans adopted the budget resolution unlocking a process to cut taxes by the end of the year. The next step will be releasing a draft tax measure on Nov. 1.
President Donald Trump continued to string out his decision on the next Federal Reserve leader this week, giving mixed signals on his preference. By the end of the week, stakes of Federal Reserve Governor Jerome Powell being appointed were high, as President Trump seem to prefer him over others. The speculation is soon going to end in the coming week, as the Fed chair is expected to be announced on Nov. 3.
Date: October 23, 2017
The rally in risk assets extended this week. Major market moving events included Trump administration’s significant step towards tax overhaul, as the Senate narrowly approved a budget vehicle for tax cuts with an all-Republican vote of 51-49. The House and Senate tax-writing committees plan to release draft legislation by early November, which will set off a furious lobbying battle, as Republicans attempt to enact a bill by the end of the year.
Regarding attempts to defeat Obamacare, Trump’s administration showed leniency this week, as senators stated they have reached a bipartisan deal on fixes to stabilize Obamacare. Should the deal become law, it could alleviate the chaos for insurers, following last week’s moves including a cut in subsidies. The two-year deal would allow crucial subsidies to health insurers to start flowing again, potentially lowering insurance premiums for those in the program next year. This comes just two weeks before Americans start signing up for 2018 coverage.
Date: October 16, 2017
Global stock markets this week rose to record highs amid various economic releases reiterating global economic strength and multiple geopolitical developments including Catalonia crisis, rising tensions between US and Iran, upcoming elections in Europe and Japan. Particularly, US stocks climbed to record highs and 10-year treasuries rallied after a core inflation reading slowed, adding to evidence that economic growth continues apace without stoking price increases. The hurricane-driven boost to the US cost of living in September fell short of projections, as the September CPI rose 0.5% month on month. The less volatile core CPI rose 0.1% month on month, following 0.2% gain; up 1.7% year on year. Another Commerce Department consumer-inflation measure, preferred by the Fed, is running below the central bank’s 2% target, with a 1.4% gain in the 12 months through August.
Date: October 9, 2017
Just as positive economic releases were bolstering confidence in global economic strength, markets again changed course as geopolitical tensions returned with a Russian news agency reporting that North Korea may test a missile this weekend. This dampened demand for risk assets and led a rally in safe havens. The CBOE Volatility Index rose 10%, the most in a month, after closing at a record low Thursday. Earlier in the week, global shares were on firm footing, amid strengthening economic data. US investors also considered the prospects that Congress will enact a pro-growth tax plan and ongoing speculation that President Donald Trump will opt for a Fed Chair who might pursue more aggressive policy tightening.
Date: September 26, 2017
The major event earlier in the week was the Fed policy meet. The central bank stood pat on the interest rate and continues to forecast a hike by year end, saying hurricane damage won’t derail an otherwise healthy expansion. This caught markets by surprise, as can be reflected in the implied probabilities of an interest rate hike in December, which jumped from near 20% to above 60% in a matter of minutes. In the statement, the Fed set October for the start of their previously announced plan to shrink its $4.5 trillion balance sheet becoming the first central bank in history to reduce its QE program. Officials announced the reduction process will start next month at a pace of $10 billion a month, which will gradually increase to $30 billion a month. This would take over 30 years to finalize the process.