SaxoInvestor Portfolios (DKK) Q3 2018 Commentary

Asset classes
Equities, Fixed Income, Non Traditional
Instruments
ETFs
Investment styleMacro strategic and diversified exposure
Quarterly Return (net of fees)
 
Conservative - Moderate
+0.4%
Moderate+1.4%
Balanced+1.9%
Growth +2.2%
Aggressive  Growth
 +2.6%

 

Market overview

As volatility returned to the global financial markets in the first quarter of 2018, and peaked at the sell-off in February, most asset classes produced negative returns. Equities recovered somewhat throughout the second quarter, and continued to do so in the third. This was particularly the case for the developed markets. However, elevated levels of volatility continued to characterize the markets due to factors such as geopolitical tensions, tightening financial conditions, rising macro uncertainty, among others.

Global equities have been seesawing but ended the first half of this year with a modest gain. Continued positive performance in the third quarter was driven by a booming US economy. Most notable here were key data points such as consumer confidence that reached a level not seen since 2000. Wages growing at a rate last seen in 2009 as well as overall strong business confidence. In Q3, we saw the strongest performance in developed equities – which was led once again by the US and followed by Japan. Despite the influence of geopolitical tensions, global emerging markets closed the quarter almost flat. Europe showed positive performance whilst the UK were negatively impacted by fears of a no deal Brexit.

Fixed income dynamics have changed somewhat, as there was a clear preference for riskier assets. For example, US High Yield continued to post the strongest returns. EM hard currency debt rebounded after a strong sell off in the first half of the 2018. European High Yield and Global Investment Grade both posted positive returns. Unsurprisingly, US and European Government debt continued to suffer on the back of tightening monetary policy in these two regions.

Portfolio performance

Returns net of feesConservative - ModerateModerate BalancedGrowthAggressive 
July +0.4% +0.9%+1.3%+1.4%+1.6%
August
–0.1% +0.3%+0.4%+0.5% +0.7%
September 
+0.1% +0.2%+0.3%+0.2% +0.3%

The risk profiles all produced positive returns in the third quarter, lifted mainly by developed equities. 

The positive performance of the equity allocations was predominantly driven by US equities (including Value and Minimum volatility) as well as Japanese equities, while emerging market equities detracted slightly over the course of the quarter. 

The fixed income sleeve overall detracted from performance, led by European and German government bonds.

Within the non-traditional sleeve we see mixed performance. While global infrastructure equities added to the overall performance for the quarter, developed market property was flat and commodities detracted.

 

Outlook

BlackRock sees the steady global expansion continuing, driven by above-trend U.S. growth. Yet the range of potential economic outcomes is widening. Surprise events fueled by stimulus and productivity gains could boost growth and risk assets, whereas escalating trade disputes and rising price pressures could create downside risks. Gradual increases in U.S. rates are tightening financial conditions globally, and have contributed to periods of volatility and sharply depreciating EM currencies. To BlackRock, this argues for a greater focus on making portfolios more resilient to downside shocks. 

Emerging markets have been hit by a series of country-specific shocks and tightening financial conditions putting pressure on those with the greatest external vulnerabilities. BlackRock see room for a recovery, especially in equities. China’s economy appears resilient, EM fundamentals are generally robust, and may be near a peak in idiosyncratic risks. Valuations reflect much potential downside. The Federal Reserve is set to keep raising rates gradually and could start to slow its balance sheet wind-down next year. Risks include escalating trade frictions, hefty portfolio outflows, and a hawkish Fed pushing up global rates and the U.S. dollar. 

Any information found in this document, including performance information and statistics are subject to change. You can find the latest updated pricing information on the description page for each available portfolio. In providing this material Saxo Bank has not taken into account any particular recipient’s investment objectives, special investment goals, financial situation, and specific needs and demands and nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and Saxo Bank assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation. All investments entail a risk and may result in both profits and losses, and all capital is at risk. In particular investments in leveraged products, such as but not limited to foreign exchange, derivatives and commodities can be very speculative and profits and losses may fluctuate both violently and rapidly. Speculative trading is not suitable for all investors and all recipients should carefully consider their financial situation and consult financial advisors in order to understand the risks involved and ensure the suitability of their situation prior to making any investment, divestment or entering into any transaction. Any mentioning herein, if any, of any risk may not be, and should not be considered to be, neither a comprehensive disclosure of risks nor a comprehensive description of such risks. Any expression of opinion may not reflect the opinion of Saxo Bank and all expressions of opinion are subject to change without notice (neither prior nor subsequent).

SaxoSelect Balanced Portfolios are offered by Saxo Bank. BlackRock’s data which is utilised by Saxo Bank in building the SaxoSelect Balanced Portfolios is based upon certain internal assumptions and BlackRock has not considered the suitability of the content of its data against individual needs and risk tolerances for all investors. As such, BlackRock’s data is for information purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy the securities described within. BlackRock’s data has not been prepared in accordance with the legal requirement designed to promote the independence of investment data and is not subject to any prohibition on dealing ahead of the dissemination of the data provided to Saxo Bank and, as such, is considered to be a marketing communication to Saxo Bank. 

iShares and BlackRock are registered trademarks of BlackRock, Inc. and its affiliates (“BlackRock”) and are used under license. BlackRock is not affiliated with Saxo Bank. BlackRock makes no representations or warranties regarding the advisability of investing in any product, portfolio or service offered by Saxo Bank or any of its affiliates. BlackRock has no obligation or liability in connection with the operation, marketing, trading or sale of any product, portfolio or service offered by Saxo Bank or any of its affiliates nor does BlackRock have any obligation or liability to any client or customer of Saxo Bank.