May Performance Update

So, it’s fair to say the start of the year has been tough. Looking forward from here, uncertainty remains around tariffs and trade deals. Additionally there is a split of professional opinion around likely path for economies and markets going forwards. Part of the issue here is that tariff policy has distorted all current economic data, making it nearly impossible to piece together what is happening in the here and now. This leaves more room to speculate than normal, with a cohort believing there is now a good chance of a US recession, and another thinking growth will stay strong.

At some point, one of those outcomes will start to show more reliably in the data, but in the meantime, investors are having a hard time working out which way things will turn, providing a period of wanted calm. All that said, it is important to note that May was a positive month for most asset classes, as they continued to recover from the volatility in March and April.

The portfolio range added between 0.68% (Very Low Risk) and 4.02% (High Risk) on the month, leaving them solidly in positive territory for the year so far, with returns between 1.38% (High Risk) and 2.86% (Very Low Risk). More pleasing than the absolute numbers is the fact that these have been delivered in a period where global equity markets overall are down 2.5%, as shown by the chart below comparing our Low, Medium and High Risk Portfolios to the MSCI World:

We will talk more about our outlook for global markets in our quarterly update at the end of June, though in the meantime it is worth stating that we remain cautious and selective. This isn’t because we see an impending recession (albeit that’s possible), or another market downturn like in March or April, but more because we agree that the range of possible outcomes is quite wide.

In those scenarios it tends to pay to focus on assets where you have a higher degree of predictability over the return journey. Favoured areas such as short term high quality corporate credit, and some of our alternative positions are offering us 6-7% in income, with a very low risk of capital loss, and hence we are focused on those areas instead of being overly exposed to asset classes with less certainty. At the same time we continue to hold solid cash weightings across the portfolio range, giving us a large degree of flexibility to move quickly when opportunity knocks. It seems very likely that with Donald Trump in charge of the world’s most powerful economy, we might not have to wait too long!