“January sick and tired you’ve been hanging on me”
Well January is over, thank goodness!
Interestingly Scottish rock group Pilot’s 1979 hit “January” wasn’t about the month at all but songwriter David Paton’s girlfriend.
The song reached number one in the UK charts of that year-ironically on Feb1st!
Apparently, this year 4m of us have abstained from alcohol in Dry January and along with the vegans and the apparent change in global warming to global freezing (have you seen those photos of Chicago) the month’s been a real blast- it’s especially bad for the UK given as a nation our love of alcohol.
For Brits, it was ever thus. In news this week, Britain’s oldest brewery has been discovered just outside Cambridge-from circa 400BC, with the discovery of the “Iron Age Brew” – I bet they didn’t have dry January then!
In fact, throughout the month we’ve had to contend with lurid and ever more doom-laden headlines from the Beeb and co. that we’re going to run out of food, meds and, most calamitously of all, booze.
So thank the Lord (and Bernard Arnault) who is riding to the rescue to address our worst held fears as LVMH confirmed yesterday in a sparkling set of results and laid out contingency plans by announcing it had stockpiled four months’ worth of champagne for us thirsty Brits! The UK is France’s largest market with 30million bottles drunk a year. We’re also its largest market for those badly built French cars that flood into us, those cheap ones manufactured via subsidies from the French government.
After the appalling EU growth numbers published on 31 January (eurozone now growing at only 0.2% in Q4 2018) the French and German economies are groaning under the weight of their own distinct challenges, yellow vests and all and Juncker and co. can hardly be looking forward to the likely drubbing by the populists in European elections on 23 May.
Currency markets though can sniff a deal despite all the noise, with trade weighted GBP +2% year to date (source Bloomberg) and BoJo and Moggy already talking of extending the transition period out to 2021.
While it may have summed up the January blues felt by so many, global markets are having none of it with the month closing out the best January return for 30 years, MSCI World closing the month +7%. Soothing comments from global central banks, talk of a trade deal between America and China, improving sentiment in emerging markets, a higher oil price and above all, reassuring full year 2018 corporate earnings in the reporting season so far have all led to strong gains in stock markets so far in 2019.
South River’s funds have had a strong start to the year, gains in Cautious, Dynamic multi asset and specialist gold equity funds, the average South River Fund is up between 2% and 6% on the month.
We added to our equity allocations in November and December, investing direct from US$ cash into equity income, energy and gold and precious metals exposure and adding to high yield and emerging markets in particular.
We hiked our exposure to sterling based assets in December. We like UK assets which we believe are oversold technically and fundamentally. Assets are cheap, especially in property and corporate bonds and dividend paying equities.
Beer goggles-If Brexit was dampening down enthusiasm for UK assets it certainly isn’t showing as foreign companies continue to pile in this month. ASAHI BREWERY bought out the owner of London Pride in a deal valuing the 300 year old brewer FULLER’s at £250m an eye watering 24x ebitda, (source Fuller’s) while FEVERTREE shares fizzed higher on an upbeat forecast and that UK obsession with gin and mixers.
On the other side of the pond the US government has reopened following the president’s agreement with the Democrats to reopen the government and here what is also interesting is how strong global cyclicals have started the year. Despite the government shutdown, the widely followed National GE, DAIMLER and the US’s largest equipment supplier UNITED RENTALS have all rallied 10% to 20% year to date. (source Bloomberg)
One of the charts we look most closely at is the NFIB small business optimism index which is close to all-time highs in the US and this along with robust employment data is encouraging for the bulls.
We remain reasonably constructive towards markets overall and Fed Chair Jerome Powell’s dovish comments added further to positive sentiment surrounding asset markets globally.