BlueOrange Asset Management April Results

Our weighted average return in April was -1.59%. Since 2015, we have generated a net return of +35.44%.

In terms of investment strategy performance, our weighted average net returns for April were (a) +0.56% for conservative strategies, (b) +0.13% for balanced strategies, and (c) -4.09% for aggressive strategies.

In April, many of the themes that had been troubling markets over the past several months were provided some temporary reprieve thanks to positive news flow. After a very turbulent end to 2019, analysts had cut their earnings targets for US companies. However, Q1 earnings have delivered positive earnings surprises, which helped restore investor confidence. As such, US stocks performed well, but the gains were mainly attributable to multiple expansions rather than impressive earnings growth.

Markets were also increasingly hopeful of the prospect of a positive resolution to the China-US trade negotiations. Unfortunately, in May these negotiations have taken a distinct turn for the worse.

As such, we stand at somewhat of an impasse. Interest rates are low, and should continue to be for some time. In fact, markets are actually pricing in the prospect of a rate cut in the US. Certain sectors of the US market – such as technology - are flying high and trading at lofty valuations once again. Unfortunately, in the rest of the world, data – especially in the manufacturing sector - continues to be weak. For instance, in China the most recent manufacturing PMI came in less than expected at 50.2. This data was an improvement from January’s multi-year low of 48.3, but is hardly inspiring. The Chinese government is committed to accommodative policy measures, but it remains to be seen how much growth they will be able to generate in the near term. Weak manufacturing PMI data from exporter powerhouses Korea (48.8) and Taiwan (49) are also a concern, as is the Eurozone manufacturing PMI of 47.8. All three of these economies are sensitive to Chinese import demand, which registered a year-over-year contraction of 7.7% in March.

So are we in a period of pause, or will a lack of confidence outside of the US create a global negative feedback loop? Is pessimism already priced in or just getting started? These are difficult questions to address, but we will remain vigilant in analyzing real data, and will try not to read too much into short-term market volatility.

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!

Pauls Miklaševičs

FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.

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