The Fund fell 0.9% in October against a backdrop of slightly weak equity markets. Gilts and US Treasuries rose, Oil was up 10% but Gold fell 6%.

Since launch on 12th July 2017 the Fund has returned 86.7% which compares with a return of 72.3% from the Investment Association (IA) Flexible Sector. Against all 680 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 first quartile over 3 and 5 years, and third quartile over 1 year. Against the IA Flexible Sector, the Fund is in the second quartile since inception.

The main feature during the month was the rotation out of Technology into defensives. Global Communication Services fell 14% and Global Technology fell 8%. By contrast Global Consumer Staples rose 10%, Healthcare rose 9% and Utilities rose 7%, although Energy (+12%) was the best performing sector due to the rise in the Oil price which rose over 10% in October. The Nasdaq Composite fell 5% over the month and ended 8% lower from its all time high in early October, but was still up 9.4% year-to-date at the end of the month.

The events in October have been overtaken by the significant fall in markets following the turn in the political tide towards the Democrats in the November US mid-term elections. It is too early to tell whether this is just a temporary liquidity-driven reaction in the wake of strong equity markets which have recently been at all time highs. It does seem the case that there has been some irrational exuberance in some AI stocks.

The Fund is very defensive with an allocation to Equities of just 21%. US Bonds represent 21% and there is a further allocation to short duration bonds of 37%. Gold and Commodities are 16% and cash is 5%.

We have previously explained that our concern about Equity markets is the valuation based on price to cash earnings. Earnings themselves have been incredibly strong, which gives there is a conflict between these two strong pulls. It is not surprising to see the equity market setbacks and volatility in early November.

US Treasuries are enjoying the Equity market setback. Actually our position in US Treasuries is less about fundamentals (debt is too high, money growth is too high and inflation is very sticky) and more because Treasuries became oversold which provided a tactical opportunity.

For the time being at least, there continues to be strong rotation away from Technology and Communication Services into defensives.

After a weak month in October, the rally in Technology (on a relative basis) at the end of the month fell away, so the allocation to Technology within the fund was reduced again in the first few days of this month, ahead of the recent rout. The current position is underweight and fairly modest compared to what the allocation had been during the summer months.

The main Equity overweights, within the limited Equity allocation, are Consumer Staples, Utilities, Consumer Discretionary and Healthcare. These sectors have significantly underperformed during the Tech ride in recent years, so they are relatively cheap, under-owned and unloved. It is normal and healthy to have setbacks in overall market levels, and it is likely that markets will remain volatile with large swings in sentiment within the sectors.

These defensive sectors have had rallies before but they have petered out. We all have to wait and see if these unloved sectors have a sustained period of outperformance. The Fund is defensively positioned sector-wise but the thing (virtue) about our rotation strategy is that the fund can move back to the growth sectors as and when the signals indicate new leadership. Already the unloved defensives are looking somewhat overbought on a relative basis.