After five consecutive months that saw the MSCI EAFE index deliver positive returns, September was down -2.60%. Despite this fall, September was a good month for materials, industrials, consumer discretional, information technology and communication services. We were over-weighted in consumer discretionary and information technology and underweight in financials, which generally helped our portfolio performance on both fronts.
Henry James International Management August 2020 Market Commentary
In July we saw the communications, technology, software and pharmaceutical industries continue to drive markets upward. In fact, some companies are thriving, not in spite of, but because of COVID-19. As the pandemic rips through the South American winter, we may be seeing a harbinger of the increasing threat in store for us in the Northern Hemisphere during our own frosty season. Sadly, even during the oppressive summer heat, COVID-19 is having a grand old time at our expense in the United States, particularly in the Southern States. Many countries in Europe and Asia are doing a far better job of opening their economies and remain the gold standard for the rest of the world to emulate. And yet, though Europe and Asia’s infection and death rates are comparatively lower, evidence of an incipient second wave is mounting. Moreover, the British and European economies are in the midst of dire recessions.
Henry James International Management July Market Commentary
In July we saw the communications, technology, software and pharmaceutical industries continue to drive markets upward. In fact, some companies are thriving, not in spite of, but because of COVID-19. As the pandemic rips through the South American winter, we may be seeing a harbinger of the increasing threat in store for us in the Northern Hemisphere during our own frosty season. Sadly, even during the oppressive summer heat, COVID-19 is having a grand old time at our expense in the United States, particularly in the Southern States. Many countries in Europe and Asia are doing a far better job of opening their economies and remain the gold standard for the rest of the world to emulate. And yet, though Europe and Asia’s infection and death rates are comparatively lower, evidence of an incipient second wave is mounting. Moreover, the British and European economies are in the midst of dire recessions.
Henry James International Management June Market Commentary
In last month’s market commentary we indicated that the global economy was beginning to rebound nicely and that we expected that the communications, technology, software and pharmaceutical industries to drive the markets upward and catalyze a global rebound. While this has been true, there is one item we missed: the spark of growth facilitated by the humble and inexplicably polemical facemask. It is not the production of facemasks that is important; rather that the countries whose citizens more steadfastly wear them that are seeing abating infections who are subsequently in a position revitalize their economies through production and consumption.
Henry James International Management May Market Commentary
In last month’s market commentary we said that we expected a global economic rebound in the second half of 2020, which would continue into and through 2021; that COVID-19 infections and deaths would diminish substantially and that its presence would be all but extinguished in Asia; and that global manufacturing would start to pick up again (particularly in Asia).
Henry James International Management April Market Commentary
Last month we stated that – despite the catastrophic way in which the COVID-19 pandemic has threated and affected life and caused the global economy come to a veritable halt – we believed a sliver of light was becoming faintly visible at the end of the tunnel. While the situation in which Earth’s inhabitants find themselves remains absolutely dire and no less serious today than it was a month ago, we feel that our prediction has largely come true, albeit with a caveat: though the light is visible it remains distant and faint. The month of April displayed evidence of “green shoots” as most major indices posted positive returns. Indeed, the broad based MSCI EAFE index returned 6.29% after posting negative returns in each of the preceding 3 months.
Henry James International Management March 2020 Market Commentary
There is only one story in town: COVID-19. While these are unprecedented and extremely worrying times from a range of perspectives, including public health, health infrastructure, medical/pharmaceutical supplies, mass unemployment, economic contraction and falling equities prices and bond yields, we are optimistic that light is becoming visible at the end of this harrowing tunnel.
Henry James International Management February 2020 Market Commentary
Since last month’s entry, coronavirus – or for the more technical among us, COVID-19 – has gone from theoretically worrying to officially scary, life-changing and economically devastating. A short time ago coronavirus was mostly China’s problem and was a situation that we in the West looked at with genuine worry and sympathy. Now, no country is immune from the devastating impact of this virus on virtually every aspect of life. The effect of the coronavirus on China can be seen as a harbinger of the impacts of the virus on other societies and economies. Initially the West was seemingly mostly concerned about the economic effects of a disruption to supply chains and was reluctant to take precautions. That has all changed as virtually every country in the world is taking extraordinary steps to abate the spread of this pandemic.
Henry James International Management January 2020 Market Commentary
While the first month of the new decade generally saw negative equity performance, after the way in which markets overcame apparent obstacles throughout 2019, we are hopeful that this is nothing more than a temporary setback. In January the MSCI EAFE index fell by -2.08%, which, while a deviation from its stellar 2019 returns, could quickly resume growth if the market returns to its long term trend in 2020. Meanwhile, the MSCI Emerging Marketing index plateaued for most of the month before falling sharply at its tail end, resulting in performance of -4.66%. Lastly, the MSCI World ex USA Small Cap index did not fare much better, as its value fell by -2.88% in January.
Henry James International Management December Market Commentary
Whoever first articulated ‘no pain, no gain’ was probably talking about weightlifting or long distance running, but little did this word-smith know that this maxim would perfectly capture what investors experienced in 2019: soaring equity prices in spite of persistent economic threat, raging volatility and nagging market anxiety. 2019 was generally very good for investors; indeed, on December 31 the S&P 500 was up 724 points (28.88%) from where it was 12 months earlier. Such gaudy, portfolio pleasing figures, however, entirely fail to account for the true story of 2019: it was a year in which there was always at least one major (often multiple) geopolitical or economic issue seemingly poised to bring markets to their knees. For example, the MSCI EAFE index’s returns of 3.27% in December, 8.21% in the 4th Quarter and 22.66% in 2019 entirely obscure the pessimism with which 2019 began, not to mention the realities of the government shutdown and the feud between President Donald Trump and the Federal Reserve over monetary policy. Indeed, by looking at the MSCI Emerging Markets index’s return of 7.53% in December, 11.93% in the 4th Quarter and 18.9% in 2019, one cannot see the very real economic scars left by the US – China trade war, nor can one recall the way in which it constantly threatened to boil over. Looking at the returns of the MSCI World ex USA Small Cap index of 4.65% in December, 11.45% in the 4th Quarter and 25.94% in 2019, there is neither evidence of the uncertainty caused by Brexit and the disastrous prospect of Britain leaving the European Union (EU) without a deal, nor any indication of how Germany’s manufacturing recession further stifled Eurozone’s anemic growth. And yet, markets muscled through these very genuine headwinds and delivered impressive gains on the back of what clearly was a fundamentally strong US and global economy and Jerome Powell’s willingness to be flexible with the Fed’s monetary policy by lowering interest rates by 75 basis points. And yet, so persistent were 2019 economic threats that the slightest hint of positive news on a topic like the US – China trade war or Brexit generally resulted in a market bounce, something that highlights the discrepancy between the terms ‘markets’ and ‘economies’ and how positive returns for the former does not necessarily indicate robustness in the latter.
Henry James International Management November Market Commentary
Perhaps the best thing about November’s market performance is that at least it did not damage the 2019 gains that seemed a rather far-fetched prospect a year ago. The MSCI EAFE index dramatically zigzagged up and down all month, and it appears that the month coincidentally happened to end while it was up an uninspiring 1.14%. The MSCI Emerging Market index followed a similar roller-coast path, but unfortunately finished the month down by -0.13%. The MSCI World ex USA Small Cap index posted modest gains that most will gladly take given the geo-political and economic conditions with which markets have been faced, up 2.28%.
Henry James International Management October Market Commentary
October was a good month for markets, and not just in the ‘growth despite raging volatility’ way that has become the 2019 norm. We believe we are seeing evidence of an economy that has resiliently chugged along despite being burdened and destabilized by a range of geopolitical and economic issues. Market performance spiked encouragingly in the month of October: the MSCI EAFE was up 3.60%, while the MSCI Emerging Markets and MSCI World ex USA Small Cap indices jumped by 4.23% and 4.12%, respectively.
Henry James International Management September Market Commentary
As 2019’s third quarter came to an end, the salient thought in our mind at Henry James International Management was ‘growth’, despite raging political, economic and market volatility. The trend evident across markets is that while 2019’s 3rd quarter was a downer, positive September growth partially offset the quarter’s losses. Despite this disappointing quarter, Year-to-Date (YTD) markets are up significantly. MSCI EAFE was +2.92% in September, -1.00% in the 3rd Quarter and +13.35% YTD; MSCI Emerging Markets +1.94% in September, -4.11% in the 3rd Quarter and +6.23% YTD; MSCI World ex USA Small Cap was +2.6% in September, -0.19% in the 3rd Quarter and +13.01% YTD.
Henry James International Management August Market Commentary
August was not a positive month for markets. The MSCI EAFE index fell by -2.58%, the MSCI World ex USA Small Cap dipped by -2.30%; the MSCI EM index shrunk by -4.85%. Dramatic though these losses may be, they are arguably slight given the scale of market-influencing political volatility August witnessed on a global scale. The main protagonists were the United States (US) and China, whose trade conflict has escalated to dangerous heights in terms of new tariffs and fiery tweets. Worse yet, the path to a resolution is not nearly as obvious as many may have deceived themselves into believing only a matter of months ago. Brexit continues to impede both the United Kingdom (UK) and European Union’s (EU) economies and there is no end to the uncertainty on the horizon, despite new British Prime Minister (PM) Boris Johnson’s insistence that Brexit will happened, come what may, at midnight on October 31, 2019. August also presented markets with a range of worrying facts: 10 year US bonds fell below their 2 year counterparts for the first time in a decade (a telltale sign of imminent recession), the US economy is slowing, China is also in the midst of an economic slowdown as well as a serious debt crisis, Germany is in a fully-fledged manufacturing recession and Britain appears headed for their first recession since the financial crisis (July’s positive UK economic growth, notwithstanding). Despite all of this cause for genuine concern, there is some reason for optimism. Firstly, low US interest rates – despite making markets defenseless in a recession scenario – should help catalyze the US economy; furthermore, they should help Emerging Market (EM) economies who are already benefiting from Chinese supply chain disruptions. Indeed, we believe that the Federal Reserve will lower rates at least one more time in 2019, with possibly more reductions in 2020. Secondly, the World Bank is anticipating global growth of just below 3% for both 2019 and 2020, which would suggest that there is still a range of underpriced opportunities available for investors. Lastly, as we saw when Sterling surged in early September when UK PM Johnson’s bold Brexit plans were frustrated by the UK’s Parliament, in a world burdened by such troubling politics, any news that is even vaguely positive will create market optimism, however ephemeral.
Henry James International Management July Market Commentary
July’s lackluster market performance stands in contrast to the volatile political and economic forces we have experienced the past month. The question we have is what – in the grand scheme of things – will July’s numbers mean for markets short, medium and long term performance? In July the MSCI EAFE was down -1.26%; the MSCI World ex USA Small Cap dropped by -0.43%; and the MSCI Emerging Markets index fell -1.14%. Given the extent of market uncertainty, one might say that such small dips in these indices are no big thing. Indeed, that may be a worthwhile view in light of the increased volatility caused by trade disputes, China’s less robust output, Brexit (possibly) drawing to a conclusion on October 31, 2019 and Germany (and maybe the European Union) slipping into recessions with the United States (US) also possibly joining suit with the news that 10 year bonds fell below 2 year bonds for the first time in more than a decade. And yet we see positives including the US’s low unemployment rate and the confidence inspired by the World Bank’s global growth forecasts of 2.6% in 2019 and 2.8% in 2020, figures that suggest we are no where near a global recession.
Henry James International Management June Market Commentary
There is a lot of turmoil facing global markets these days, but – despite a shaky May – two quarters into 2019 there is a lot to be positive about. So far this year, we have seen a great deal of drama involving the world’s two superpowers on the verge of a bare-knuckle trade war. Despite the many reasons to be pessimistic, Year-to-Date (YTD) markets have performed brilliantly: Developed Market (DM) equities are up a roaring 14.49% as measured by the MSCI EAFE index; Emerging Market (EM) equities stiffed armed 2018’s woes, up 10.76% and the MSCI World ex USA Small Cap is up an impressive 13.22%. For the Second Quarter these indices are in positive territory: the MSCI EAFE +3.97%, the MSCI Emerging Markets +0.74% and MSCI World ex USA Small Cap +1.97%. Both the YTD and Second Quarter figures have a stellar June to thank for such happy reading, as the month that just finished clawed back the devastation wreaked by May with the MSCI EAFE up 5.97%, the MSCI Emerging Markets +6.32% and MSCI World ex USA Small Cap +4.59%.
Henry James International Management May Market Commentary
An Irish poet once wrote, ‘Things fall apart’. While William Butler Yeats’s words were illuminating the terror and awe of the second coming of Christ, it would be easy to see how investors might consider them rather apropos for the way in which May managed to thwart and consume 2019’s positive market momentum. Just as the S&P 500 reached its record high at the end of April, May saw the index fall by -6.35%. Developed Market (DM) equities were also victims to the blood-dimmed tide: as measured by the MSCI EAFE index their value tumbled by -4.66%. While such losses will trouble investors, particularly as most indicators point towards a daunting, uphill climb for markets for the rest of 2019 and beyond, it would be wise to remember that year-to-date the S&P 500 and MSCI EAFE not only remain well into positive territory, they are both exceeding the expectations set during the dismal days of December 2018. While American and DM equities have been left merely bruised, May brought Emerging Market (EM) equities to their knees. Their stellar 2019 returns were overrun and eliminated, falling by -7.22% as measured by the MSCI EM index, practically down to where they were at the end of 2018.
Henry James International Management April Market Commentary
In our last Market Commentary our delight with 2019’s first quarter returns was somewhat tempered by the view that widespread geo-political risks could send markets crashing down and undermine investor confidence. In so far as April was concerned, we were grossly out of step – April saw the S&P 500 end at its all time high 2,945.83 and up 4.05% for the month. Developed Market Equities (DMEs) were up 2.91% in April as measured by the MSCI EAFE; Emerging Market Equities (EMEs) followed suit, up 2.12% as measured by the MSCI EM Index. Unfortunately, as things stand at the time of writing this commentary, the early days of May have so far managed to wipe off April’s gains, leaving investors filled with uncertainty about the immediate future. However, it’s important to look at the longer view. Year-to-date most of the relevant indices have exhibited strong returns: the DMEs as measured by the MSCI EAFE are up 11.72%, the MSCI EM Index is up 11.75%, while certain regions have defied gravity and posted exceptional returns like the MSCI BRIC Index up 15.54% year-to-date and Chinese Large Caps, which have particularly defied the odds, posting a 22.6% year-to-date return.