Rough winds? | MBMG Investment Advisory Report and Outlook 1st May 2022
A Wrong of Passage?
One month ago, we wrote about the dangers of “the toxic combination of asset bubbles , structural impediments to growth , economic policy mistakes and belligerent foreign policy .”
The bad news is that the dangers, of anything have increased.
The good news is that so have the opportunities.
This month, our commentary section, The Backdrop, will be more in tune with Janus, the 2-faced Roman God of beginnings, doorways, passages, and endings –looking back on April but rather than dwell, we also look forward to the road ahead.
The key question to us was always about how the ‘sequencing’ of these issues would determine the ultimate outcomes and we continue to see increasing divergence, with economic and foreign policymakers, especially in the west, continuing to increasingly act as if their actions don’t have any consequences. That’s not to say that policymakers in the eastern hemisphere have everything right – we don’t know of any that do and many administrations in this part of the world find themselves subjected to pressure to dance to the tunes played by governments in Washington, London, and Berlin. April, however, was perhaps the first sign that was visible to many people that the consequences will start to come home to roost.
In early April, we actually changed our outlook significantly, highlighting that the volatility that we had done so much to avoid in quarter one was already creating opportunities but that having worked so hard to keep heads above water during the first 3 months of the year, this would involve exposure to greater risk of loss.
For clients keen to take a medium-term view (say 1-4 years), opportunities now exist to generate attractive returns with reasonable reliability. However, in the short term, this involves greater risk of reversals because sadly markets don’t ring a bell to announce tops or bottoms.
We remain very wary of the risks involved in ‘catching falling knives’ but perhaps it’s time to start very carefully to pick up by the handles some of the fallen cutlery that is already lying around on the floor:
“Don’t ever try to pick bottoms. It sounds disgusting and it’s likely to prove costly.” – Christopher Lees, J O Hambro
Our analysis section, The Technicalities, features the first part of an extended series of articles that we have written about the history of The Ukraine. We felt compelled to do so partly in order to improve our own understanding, partly because of the requests for a more in-depth follow-up to our January paper on Ukraine which was incredibly kindly received but also because it has proven so challenging to obtain reliable, impartial information about either Ukraine or The Ukraine in the deafening propaganda wars that have increased in intensity. We don’t claim to be experts but we’re very grateful that over 1,000 readers have taken the time to read our original paper, that so many have given positive or constructive feedback and engagement and that it has been cited and shared by so many whose genuine expertise we admire and revere. We just hope that the follow up doesn’t disappoint.
After all, there are already too many disappointments. After all, there are already too many disappointments at this time, just as the 1960s led to widespread inter-generational disaffection and protest –
And what did you hear, my blue-eyed son?
And what did you hear, my darling young one?
I heard the sound of a thunder, it roared out a warnin’
Heard the roar of a wave that could drown the whole world
Heard one hundred drummers whose hands were a-blazin’
Heard ten thousand whisperin’ and nobody listenin’
Heard one person starve, I heard many people laughin’
Heard the song of a poet who died in the gutter
Heard the sound of a clown who cried in the alley
And it’s a hard, and it’s a hard, it’s a hard, it’s a hard
And it’s a hard rain’s a-gonna fall
A Hard Rain’s A-Gonna Fall – Bob Dylan
1. MBMG Portfolios based on the average performance of MBMG IA’s private client portfolios of USD 1 million or more, from 1st January 2017 to 30 April 2022 (based on latest actual & estimated data to 30 April 2022).
2. Average US$ portfolios based on estimated ARC Research Private Client Indices from 1st January 2017 to latest available actual & estimated data to 30 April 2022) – https://www.suggestus.com/pci.
Over the past 5 ¼ years, MBMG’s average advisory portfolios have generated cumulative gains of over 47%. This equates to well over double the return of the average wealth manager portfolio across all asset classes and is equivalent to an annual rate of return (CAGR) of 7.5%.
The average MBMG advisory portfolio loss of -2.03% year to date compares favourably with the average wealth manager loss of -10.2% for the same period:
MBMG remains hopeful that our portfolios will continue to be able to report only one losing semester since their inception at the beginning of 2017, whereas the average manager portfolio looks highly likely to record a third negative semester.
Shall I compare thee to a summer’s day?
Thou art more lovely and more temperate.
Rough winds do shake the darling buds of May,
And summer’s lease hath all too short a date.
Sonnet 18, William Shakespeare
