InvestNow News – 13th Dec 19 – Pie Funds – A message from Mike: Year in review
5th Dec 2019
Confident consumers
In the end, 2019 wasn’t as bad as feared. Markets survived and thrived despite a backdrop of slowing economic growth and political unrest. Trade wars, a manufacturing slowdown, civil unrest in Hong Kong and the BREXIT fiasco to name just a few. Why have markets survived regardless?
In my opinion there are two reasons the global economy hasn’t collapsed.
Number 1: the consumer, who makes up around 70% of the US economy, has continued to spend and remained confident in their outlook. Why? The answer is in my second point.
Number 2: 10-year government bond yields fell by 1.8% in the past year. While not all of that was passed through to borrowers, a $1m mortgage will cost you $10k less this year than last year i.e. borrowing costs have fallen around 1%, so the average household or consumer has remained buoyant. Add in bank cash-back offers and the cost of borrowing has never been cheaper. This is conventional monetary policy working as it should. Lower interest rates stimulate the consumer and therefore the economy.
Looking ahead
Where to from here? We seem to be in the middle of another market recovery after the 2018/2019 global slowdown. I don’t think it will be as long or as powerful as the previous moves for equities, but the trend nonetheless is currently up.
Returns for our funds this year have been strong, with the exception of the Multi-Strategy Fund which I discuss further below, and the UK Fund which is specifically related to BREXIT woes (although it had a solid November). Year to date returns to 30 November 2019 are as follows:
The Australasian Funds are up between 17.1% and 41.6% and the International Funds returned between -9.1% and 14.2%. Conservative is up 5.5%. Overall, I’m pretty happy with this 8/10 result.