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 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.