Investment News & Views

Monthly Portfolio Update
March 2020

The Covid-19 Coronavirus outbreak and Guardian Portfolio trades

Following stock market falls in response to the news that new clusters of the Coronavirus had taken hold outside of China in South Korea, Italy and Iran, we held an emergency investment committee meeting on the 26th February as well as our normal investment committee meeting on the 2nd March.

At the 26th February meeting we decided to reduce our exposure to the Pacific, Japan, FTSE All Share, emerging markets, Europe, and the FTSE 250 to differing degrees based on analysis of shorter trend-following indicators than we had previously selected, as we expected our chosen indicators to follow these shorter ones by the time of our scheduled investment committee meeting and trade day on the 2nd March. We did not come out of the US or International funds at that point in time because none of the trend-following indicators signalled to do so.

Our decision on the 26th February to reduce equity exposure and add a gold ETC in the alternative basket of investments across our Guardian strategy has helped the Guardian portfolios to weather the current market falls. As these portfolios are designed to minimise volatility and reduce market exposure in times of drops in market values; we have positioned these portfolios to side with caution.

In the days following the 26th February, the markets continued to fall showing that our early initial response was helpful. The signals at our investment committee meeting on the 2nd of March reflected the trends which we had expected. The signals for the Pacific, Emerging Markets and the FTSE All share were exactly as we had predicted they would be by this point. Other markets have followed downwards with the shorter signals for Europe, the FTSE 250, and Japan in line with the action which we have already taken even if the longer selected trend-following crossovers for them are too long at this point in time to trigger the full extent of the sell signals. The shorter trend-following signals on the 2nd March also caught the drop in values for the US and International markets.

We are aware that central banks from around the World have signalled that they would support the markets and the economy, but we are expecting continued volatility for the next few months as the impact of the coronavirus is still expanding and uncertain. On the back of this expected continued volatility but, also bearing in mind central bank support, on the 2nd of March we took the decision to also reduce our exposure to US and International funds. We will continue monitoring the markets daily and may call further emergency investment committee meetings if required.

As of today’s (3rd of March) FE reports, all Guardian portfolios outperformed over the past month, the past three months, and from 1 year on. We are now monitoring additional crossovers using shorter trend-following signals daily to see how the markets are responding.

Heritage and Green Path strategies

While we have taken a cautious stance on our Guardian portfolios, we have continued to hold our asset allocations for both Heritage and Green Path. We believe that the impacts of the coronavirus will not have longer term implications. Mark Carney, the Governor of the Bank of England, on March 3rd said he expected “disruption not destruction” with economic impacts lasting up to six months within the UK. Governments and central banks throughout the world have announced their intention to help stabilise markets.

Due to the buy and hold nature of the Heritage and Green Path strategies, these portfolios are expected to have more volatility, but any losses that are felt in the short term will again eventually recover.

As of March 3rd, the Green Path portfolios have outperformed their benchmarks for the past six months.

The Heritage Strategic, Balanced and Cautious portfolios have also all outperformed their relevant benchmarks for all time periods. The Heritage Adventurous portfolio has underperformed over the past 1 and 3 months, but, outperformed over 6 months and over 1 year. We expect these results to improve once the markets fully rebound.

All FE reports for March 3rd are available on the webpage and reflect our current trade position after trades yesterday.

  • Wednesday, March 4, 2020

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Tomiko Evans

Chief Investment Officer

Tomiko is Chief Investment Officer of Crossing Point and holds the IMC qualification for Investment Management.