0333 241 9900

News and Articles

An overview with Ben Cowley

Market Commentary - October 2016

Ben Cowley, 4 November 2016

Every month that passes creates new trends to digest, and new analysis to undertake. An investor's job is to keep track of these changes but not let short-term market noise dictate the integrity of his or her portfolio. At Flying Colours, we try to cut through the market froth and make sensible, intelligent decisions for our clients with a focus on long-term value.

One of the key trends driving markets in 2016 has been the record low bond yields seen across most of the developed world.

A combination of low inflation, subdued global growth and aggressive bond purchase programmes by central banks has helped push bond yields lower and lower. At one stage in August, an investor was locking in an interest rate of just 0.52% per year for the next 10 years for lending to the UK Government.

To combat this lack of value, we made the decision to shelter some of our clients' assets invested in our Dynamic Portfolios in cash. While these positions hurt earlier in the year, October saw a sharp reversal in bond yields meaning UK government bond funds delivered a 4.9% loss for investors (remember, bond yields act inversely to prices).

The rise in UK government bond yields also led to losses from sterling corporate credit - that is bonds investing in company debt. Funds exposure to this asset class fell 3.8% in the month. In October at least, cash was king compared to UK fixed income.

On the flipside, it was another strong month for overseas equity investors, with sterling weakness providing a tailwind for global equity markets. Japan (+7.9%), Emerging Markets (+6.5%), Europe (+6.0%) and US (+5.4%) delivered nicely when compared to the UK index return of 0.7% in October.

Looking forward, investors are nervously anticipating a key geopolitical event - the US Presidential election, which will be decided next week.

Donald Trump and Hillary Clinton offer radically different visions for American domestic and foreign policy. The uncertainty makes it very difficult for investors to plan in advance and we will continue our mantra of focusing on value ideas that will deliver over the long-term.

Looking for investment advice in uncertain times?

Call us on 0333 241 9900 for a free no-obligation consultation or arrange a call back.


Categories: Market Commentary

Related Articles

COVID-19 Update - FCL Response

16 March 2020 / Peter Wilson

Investment Commentary: February 2020

17 February 2020 / Guy Myles

Book your free consultation

Friendly, approachable and no pressure

Cookie Preferences

Select the cookies below to help us personalise and enhance your experience on this site. We will remember your choice for 90 day, but you can change your mind at any point by clicking the manage cookies link in the footer of our website.

For more details on the exact cookies we use, please read our privacy policy.

Necessary cookies

These are cookies that are required for the operation of our website. They include, for example, cookies that enable you to log into secure areas of our website and use our services. We also have contractual obligations with paid traffic sources where we are required to provide statistics on conversions. We use cookies to track this.

Always Active

Performance (analytics) cookies

We use performance cookies to gain an understanding of how people discover and navigate our website, and on which type of device. This helps us to improve our website by making informed decisions on real world data.

Targeting cookies

These cookies are set through our site by our advertising partners. They enable us to track the effectiveness of our advertising so that we can target our marketing spend in the most cost efficient way. Some advertising partners may choose to show you adverts on other sites relevant to you based on your browsing.