2019 was a good year for investment markets generally after a challenging 2018. For the UK investor, portfolio performance in the final quarter was strongly influenced by Sterling strength and equity style shift as the market tilted towards value and cyclical stocks. This is something that has happened a few times over the last 10 years while quality growth strategies have outperformed consistently over that period. There are often comments about how this will not continue and that value strategies are due to outperform, yet this is yet to happen for anything other than short bursts. The relative value or otherwise of stocks is best judged with hindsight as Price to Earnings ratios are only one of many metrics that form part of the consideration of whether a particular share is at a “good” price. It has been said that investors should “live in quality and holiday in value” and the last 10 or more years suggest that maxim is correct, but nothing is forever……..
As we move into 2020 (yes, 2020!) there are still geopolitical risks out there and although the Phase One agreement between US and China is promising, there is tension in the Middle East, Trump is under threat of impeachment and growth is still tepid. However, it is clear that Central Banks are prepared to support markets after the liquidity problems which shocked the market in December 2018 and repeated in September and December 2019. Interest rates are set to stay lower for even longer so conditions are relatively benign for investors, but in the immortal words of Monty Python “always expect the unexpected”!