Macro
Chris Watling

The consensus outlook for the US economy has become increasingly fearful in recent months. In particular, the bears point to renewed trade war concerns, which have been damaging confidence. At the same time, signs of heightened recession risk are emerging. These include:Inversions in parts of the US yield curve,A warning... Show More

Macro
Chris Watling

For most of the last 10 years, the world’s major central banks have been creating significant amounts of cheap money. This has been primarily achieved with various QE and other liquidity programs, as well as negative interest rates in many parts of the global economy. That cheap money has found... Show More

Macro

The world’s most powerful central bank, the Fed, has hiked rates nine times since 2015. After a policy of providing guidance, and sticking to it, the Fed abruptly turned dovish in December. Fed policy is one of the key drivers for markets globally, particularly given the backdrop of quantitative tightening,... Show More

Chris Watling

There are a number of reasons to switch weightings out of one asset class and into another. One of those reasons, which is often an effective strategy, is an absolute or relative valuation which has become stretched (one way or the other). Show More

Chris Watling

The debate over whether a value or a growth style produces better long term investment returns continues, with staunch advocates on both sides. Certain high profile investors such as Warren Buffett continue to champion the Benjamin Graham school of value investing while, in contrast, recent BAML fund managers’ surveys have... Show More

Chris Watling

Chinese steel consumption is the most significant variable in determining the iron ore price. China consumes over half of the world’s iron ore each year. As such, and while supply themes play a role, cycles of Chinese credit growth and housing activity are the key factors in determining iron ore... Show More

Nicholas - Thank you for your feedback, we have some sympathy, but we are not entirely convinced by your comments (or more precisely Buffett/Munger’s comments). Theoretically, it is possible to distinguish ‘value’ and ‘growth’. Historically, stocks have been assigned as ‘value’ or ‘growth’ dependent upon their book-to-market ratio (i.e. the inverse of the price-to-book ratio) as outlined by the work of French & Fama in the 20th century. Other modern definitions include other fundamental factors such as recent EPS growth rates, dividend yields, and sales per share growth rates (full definitions are available on index providers’ websites). Whilst the terms ‘value’ and ‘growth’ may be misleading and some investors may not feel they are appropriate, they do refer to clear, well laid out fundamental screens that are widely used by equity fund managers. Indeed the chart we show in the blog shows that different ‘styles’ appear to perform well in different macro environments; specifically, as we illustrate, with those different environments dictated by the trend in the nominal risk free rate (i.e. US bond yields). Whilst we appreciate that one may take issue with the concepts’ labels, the relative performance resulting from their different fundamental characteristics is relevant to equity investing.

On Value vs. growth -