2018 – Week 24 Recap

Observations

  • A week of economic data most prominent being Wednesday where the Fed raised rates for a second time this year, hinting another possible two times this year.
  • Yet most markets remain unchanged apart from tech and biotech which saw advances.
  • Europe was still hampered by UK’s continued battle with BREXIT, concerns with US Trade and also possible tapering from QE later this year.
  • G7 meeting in Canada, Trump tactics on his worldwide tariffs, extremely firm on implementation but details can still be discussed.

 

Our View

Markets this week finished virtually the same even though there was much economic data released.  Here are some notes from the largest events.

FOMC Meeting

  • There will be an expected 4 times for rate hikes this year.
  • New rates are 1.75 to 2%
  • The FOMC is confident in the US economy through its words and statements.  These words are quite positive as compared to previous meetings.

European Central Bank

  • The focus is on when the tapering of QE will occur. The answer came in this meeting. The 3-year bond-buying program will finish by the end of this year.
  • Summer 2019 is when they suggested of possible rate hikes.  Historically there is a gap in time between the commencement of tapering and rate hikes.
  • The Euro drops significantly during the day as the ECB vows to keep rates low slashing the growth forecast this year (Fig. 1).  This is a disappointment as the market was pricing in rate hikes by June 2019.  The higher the interest rates, the currency usually become more attractive with a direct correlation.
Fig. 1 - EUR/USD daily decline after ECB meeting (Source: TradingView.com)

Fig. 1 – EUR/USD daily decline after ECB meeting (Source: TradingView.com)

 

On the same day, we saw the US Dollar rally back up to its resistance level of 95 for the DXY (Fig. 2).  This means that dollar strength continues and the gold sector will also have to wait for now.

Fig. 2 - 2018-06-15 US Dollar Index rally (Source: TradingView.com)

Fig. 2 – 2018-06-15 US Dollar Index rally (Source: TradingView.com)

 

Conclusion

Without going into too much detail on the economic data around the world, which is beyond the scope of this publication, we continue our defensive positions yet view many sectors lacking fresh momentum with each passing week.  We continue to be conservative yet at the same time have joined up with another team to look into other possible opportunities.  These details will be revealed at our upcoming seminar.

 

MODEL PORTFOLIOS

Model Alpha: CX PORTFOLIO

Regular Savings Model – No Changes

Holdings

  • 69.79% Fidelity US Dollar Cash [FUS]
  • 14.98%  Fidelity ASEAN [YASE]
  • 15.23%  Fidelity China Focus [YCHI]

Monthly Allocation

  • 70% Fidelity US Dollar Cash [FUS]
  • 15%  Fidelity ASEAN [YASE]
  • 15%  Fidelity China Focus [YCHI]

 

Model Beta: FT LIFE PORTFOLIO

Regular Savings Model – No Changes

Holdings

  • 10.04% Barings ASEAN Frontiers Fund [F148]
  • 0.32% BlackRock World Financials Fund [F221]
  • 12.09% BlackRock World Gold Fund [F90]
  • 16.65% BlackRock World Mining Fund [F91]
  • 9.80%  BNP PARVEST Equity Russia [F180]
  • 40.37% Fidelity US Dollar Cash Fund [F113]
  • 9.69% Investec GSF Global Gold Fund [F75]
  • 0.33% JPM China Pioneer A [F225]
  • 0.33% Franklin Technology Fund [F224]
  • 0.38% Franklin Biotechnology Discovery Fund [TEMBIO]

Monthly Allocation

  • 10% BNP PARVEST Equity Russia Fund [F180]
  • 10% BlackRock World Financials Fund [F221]
  • 10% Franklin Biotechnology Discovery Fund [TEMBIO]
  • 10% JPM China Pioneer A [F225]
  • 10% Franklin Technology Fund [F224]
  • 10% Baring ASEAN Frontiers Fund [F148]
  • 40% Fidelity US Dollar Cash Fund [F113]

 

 Lump Sum Model – No Changes

Holdings

  • 9.92% Baring ASEAN Frontiers Fund [F148]
  • 14.39% BlackRock World Gold Fund [F90]
  • 16.27% BlackRock World Mining Fund [F91]
  • 9.98%  BNP PARVEST Equity Russia [F180]
  • 39.51% Fidelity US Dollar Cash Fund [F113]
  • 9.93% Investec GSF Global Gold Fund [F75]