February 2010
Message to our valued client
Welcome to 2010 and happy new year, may it be a prosperous and healthy one for all, the below is our view for this year as we currently see it.
This year promises to be a challenging and defining year for all of us particularly as we position ourselves coming out of the recent financial crisis.
Last year 2009 overall saw a return to reasonable returns and profits, some exceedingly so, but still on the back of the 2008 losses which were obviously greater - still a good recovery is taking place but did the investor class participate?
This article from the New Zealand Herald this week suggests not, at least in that country.
So is that the same for off shore investors? - a mix we would suggest, the equities went on a bull run from March 2009 but although bouyed by high commodity prices such as oil and copper and record prices for commodities such as Gold and Silver for example, most commodity funds under performed in our opinion but could be an asset class worth looking at in 2010 with the right fund.
Alternative and Futures investments were flat to down but should be held as part of one's portfolio, particularly if capital is guaranteed.
So where to invest in 2010? Well, in our message to clients in November 2008 we advised a return to equities as we felt that if it hadn't hit the bottom it was very close to it, that proved to be on the money and regular savings investors reaped the benefits very well from that.
Managed equity funds either directly held or inside portfolio's however were mixed - some did indeed perform well but others sat on the fence, reluctant to get back in fearing further fallout, unfortunately those fund managers guessed wrongly and even today some of them remain unconvinced they should re-enter fully.
They may of course be right, but they weren't in 2009 and we don't feel they will be for the next 6 months probably 12 - they missed all the growth during 2009 which can't be retrieved.
Ok, so what do we advise re managed equity funds this year? We would advise to buy them, we think they will involve themselves more in the markets this year and should have a better year than 2009,
We are expecting a much more modest growth with hiccups and volatility along the way but if you read the below article and the quotes from Goldman Sachs then you should be putting a lot of money in this year.
So just equities? Well, no, we see commodities and precious metals as valuable areas of investment this year but the fund choice is important - with the deficit in the USA showing no sign of improving
the chances are the dollar will lose more ground this year, at least until interest rates rise significantly, and that is unlikely to be of sufficient magnitude during the next 12 months, so gold may continue to prove a safe haven on that score. Political tensions and concerns over security may see the dollar attract safe haven flows from time to time of course.
The Trend following futures funds and alternative investments still represent a good non correlated part of anyone's investment make up but we are continuing to monitor the percentages involved.
So, the economy is just fine then ? No, there will continue to be peaks and troughs this year
What about Property, Fine Wines, bonds and fixed income ? - The latter has, with exceptions, given low returns recently as interest rates remain low and we don't see that changing a great deal in the next 12 months.
Bonds, some have been good some have been average and we would not have wanted to be a Chrysler bond holder who now finds themselves unceremoniously shunted down the priority list.
- Property, some funds remain suspended and in the USA foreclosures are continuing or being delayed as one of the fire starters of this crisis works it's way through it, we will monitor this area for a longer time before we recommend re-entry,
Does this mean property funds will lose money in 2010? No, not at all but there remains a risk that is hard to quantify and for that reason we will stay out a little longer.
Fine Wine? A possibility for certain clients now that there is more money changing hands in the world again
So in summary we see direct equities as still being a good growth area, we see managed equity funds as being a good, but perhaps a more modest, growth area, being important to wealth protection as they can predict the downside due to their pragmatism.
We see alternative investments and managed futures as good diversification for the portfolios again with downside protection and hopefully this year better growth.
Commodities should have a positive year with some funds doing well, likely to remain volatile in the short term though.
The very best of investing to you all
