Greetings everyone and thanks to Rob for writing the Money Matters last week! As we are in the heart of Q1 earnings season let’s get right to it!
The main focus has been on the weaker than expected data out of China along with disappointing data out of the US. This caused some hesitation in the markets which was reflected by the S&P, down 1.5% last week, the FTSE 100 which was down 1.3%, while on a different trend the Hong Kong Hang Seng ended the week up over 1%. We’ve talked about market expectations many times so let’s reflect on this by looking at some of the China numbers. China GDP was expected to be at 8% but results came in at 7.7%, while industrial output for March was expected to be around 10%, but results came in at 8.9%. So although the numbers weren’t far off expectations the fact that headlines read “China misses expectations” is powerful enough to send some investors to the sidelines!
Since many investors are looking at the bigger picture and investing for the longer term, many might be asking what this means in the longer term and where the values are in the markets today? One area to certainly consider would be industrial commodities. Although commodities won’t recover overnight but instead will take some time to recover, they do look rather cheap at their current levels. And this may entice investors to want to acquire these whilst they are a cheap buy! To give you an idea, copper is at its lowest levels in a year and a half and aluminum is at a 3 year low. These are two industrial metals that have taken a hard hit and although they could remain low for some time, investors looking for value and a bargain in the market, might consider adding or increasing holdings into the industrial metals sector. By holding these sectors, when they do bounce back, investors have the ability to benefit from the upside. Although do take heed – we don’t have a crystal ball, and there is no guarantee of when or by how much an upswing (or downswing) will be, so talk to your Adviser if you are interested in such a market opportunity and whether your portfolio could benefit from a move like this.
n the mean time, investors should continue with a diversified and balanced approach as stocks look to continue on their overall upward trend, and with corporate earnings for the most part beating expectations, this should only help support this. South East Asia funds have seen some decent gains in recent months and with fundamentals improving in that region it makes a strong argument that the region could be a strong performer this year. Certainly there is plenty of volatility in any stock, so be sure to surround these type of growth holdings with fixed income holdings in order to stabilize the swings.
For Austen Morris Associates’ investors – talk with your advisor about any repositioning to take advantage of markets at this time. For more information about Austen Morris Associates please visit our website.
Thanks for tuning in to this week’s Money Matters!
Darren Cox
Co-Head of Portfolio Management
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com
