The Fund rose 2.6% in January. Since launch on 12th July 2017 the Fund has returned 79.7% which compares with a return of 62.7% from the Investment Association (IA) Flexible Sector. Against all 637 funds in the four IA Mixed Asset Sectors (Flexible Sector plus the 0-35% Shares, 0-60% Shares & 40-85% Shares Sectors), the Fund is ranked in the 1st quartile over 3 and 5 years, and the 3rd quartile over 1 year.

In January the UK performed well at 3.1%. World Equities rose 1.7% before any FX effect, but this was reduced to 0.2% in GBP terms due to the weakness of the US Dollar versus Sterling. The S&P 500, US Treasuries and Gilts all gave small negative returns in GBP terms. Gold rose 16% in USD terms and 14% in GBP terms.

The best performing sectors were Energy (+10%), Materials (+7%) and Industrials (+5%). The worst performing Sector was Technology (-3%).

There is a lot of noise for investors to be distracted by. The chairman of the Federal Reserve has been put under pressure by Trump which has raised concerns about its independence, undermined the US Dollar and highlighted concerns about the growing US debt, although this has been somewhat assuaged by the appointment of Kevin Warsh. There are geopolitical worries relating to Iran and NATO, and political instability in the UK.
Despite all this, what matters most to markets, and equities in particular, is valuation, monetary policy and corporate earnings.

Equity markets are being pulled up by continued strong earnings – it is certainly the case that the technological and AI revolution is changing the world. In the corporate world, these changes are having a huge impact on productivity which has the potential to drive corporate earnings higher.

The negative is that, despite strong earnings, equity valuations are generally very expensive. That is not to say that there are not attractive individual stocks – there is increasing focus on the opportunities outside the tech sector and outside the USA. Nevertheless, world equity markets are correlated, so an expensive valuation generally is a concern for all equity investments.

Our approach is to back away from investing too much in equities when valuations are at these expensive levels. We are not sure what a catalyst might be for any setback in markets and we may be too cautious. However, from a risk/reward point of view, our model is conditioned to conclude that it is better not to be greedy because long term capital appreciation relies partly on not suffering major losses. We note that Warren Buffet has raised large amounts of cash for essentially similar reasons.

While the Fund is at a stage of not being fully invested in Equities, Gold and Commodities remain an important feature. Gold has had a setback which is not abnormal in a longer term context. The Silver crash has caught the headlines but our general Commodity exposure is via a diversified basket.