An unprecedented wave of political and economic uncertainty in Europe over the past few years has created significant opportunities for investment teams to uncover real value in Europe’s small and mid-cap equity markets. Bertrand Faure, Portfolio Manager of the EI Sturdza Strategic European Smaller Companies Fund (the “Fund”) has successfully navigated these markets, identifying undervalued companies with high upside potential.
In April, the trade war between the US and China was still a matter of concern. In addition, a wave of new US sanctions against Russia led to a rally in the commodity markets, with Aluminum leading the trend with a surge of 14% on the back of sanctions against the Russian producer Rusal.
During April the Fund reported a gain of +0.68% on an absolute basis. After a negative first quarter, European financial markets took a breather in April, with solid economic growth outpacing geopolitical risks and the uncertain environment for monetary policies globally. As a result, the Fund’s benchmark was up 4.49% during the month.
In April, NYMEX WTI CRUDE rose 5.59% to finish at $68.57. At the same time, the US 10y treasury yield increased by 7.82%, closing the month at 2.9531.
In April, the performance of the Japanese domestic market was mixed following geopolitical turmoil and in anticipation of the forthcoming earnings season.
As the Fed continues to reduce the scale of accomodation, calls for an economic slowdown have increased, despite the market’s fundamental backdrop.
April was a positive month for equity markets, leading to a partial reduction in the gap between the market’s peak in January and its low registered in March. Throughout the month, the MSCI World Index and the S&P500 underperformed in relative terms (returning +0.95% and +0.27% versus +4.72% for the Nikkei Index and +4.02% for the MSCI Europe Index respectively).
In April, the Japanese market gained more than the US against a backdrop of rising US long-term yields, which resulted in a depreciation of the JPY and an increase in the yield on 10-year JGBs. Rising WTI oil price futures also supported the market.
Portfolio Manager Lilian Co perceives April macro data to be largely in-line with expectations, with Inflation remaining in check.
In March, the Japanese market declined, with President Trump’s worldwide trade sanctions dragging down market sentiment. Foreign investors turned to net buyers in late March, whilst domestic individuals turned to net seller.
The correction of US equities in February, which was more technical in nature than anything, spread to March as political drama came to the fore.
In March, NYMEX WTI CRUDE was up 5.35% to finish the month at $64.94. During the month, the US 10y treasury yield decreased 4.25%, closing at 2.7389.
March turned out to be another volatile and poor performing month for European Equities. In spite of a solid earnings’ season, and expectations for continued positive earnings’ momentum, very few companies in Europe traded upwards post their annual release.
March was a difficult month for equity markets, with high volatility, which nevertheless was lower than during the previous month. The MSCI Europe Index lost ground (-2.35% in March, -4.87% year to date), dampening the bullish reaction, which had characterised the second half of February.
In March, the most awaited economic data were unemployment figures, in particular the average hourly earnings, which rose by 2.9% YoY (the most since 2009) in January and led to market turmoil on the back of inflation fears.
In March, the Japanese stock market continued to be subject to sharp movements, influenced by the protectionist stance taken by US President Donald Trump and related media reports. Further, setbacks for US technology stocks also had a negative impact. The TOPIX closed the month at 1,716.3 (down 2.9% MoM), while the Nikkei 225 finished the month at 21,454.3 (down 2.8% MoM).
In March, market sentiment was dominated by trade disputes, with daily stock market movements dictated by Donald Trump’s tweets. The month started with the US imposing import tariffs on steel and aluminum globally, however later in the month it transpired that these measures targeted import tariffs on Chinese goods.
February marked the return of volatility to European financial markets. Volatility picked up on Friday, 2nd February with the rise in average hourly earnings growth in the US from 2.5% year-on-year in December to 2.9% in January. This, combined with a recovery in price inflation, lead investors to reassess the Fed’s policy outlook significantly.
In February, the U.S. equity markets were subject to a correction after a long run, which had been marked by particularly low volatility, urging questions such as: (1) if the sell-off had been caused by rising rates? and (2) if this correction would alter the Fed’s path?
In February, the Japanese market declined sharply, triggered by a sudden increase in market volatility, especially in terms of VIX-linked derivative trading, which created large financial losses. During the month, the market at times moved with a lack of direction, leading investors to shy away from investments.