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Annualised Returns - The Money Pouch Performance

So, after a choppy year with Trump trying to derail international trade with the US-China trade war and the US government shut down. the stock market still managed to battle through and our strategies have been roughly on target.

Our balanced strategy has underperformed, but we have tweaked all the strategies which will take effect in next month's rebalance, adding the ability to hold the bull USD ETF, so we can go to the greenback if necessary rather than treasuries or gold as a hedge. We have changed a couple of other very minor things, but the strategies remain similar. We are just performing small tweaks to add to performance in light of the current economic fundamentals.

The main economy and the stock market don't run hand in hand. However, usually the stock market is a leading indicator of the economy. You can read about the Granger causal relationship here. You saw some jitters at the end of 2018 and it could be an indicator of what is to follow. Typically, equities do better from October-May and then bonds & treasuries usually outperform. As Quantative Tightening has arrived, my guess is that this will be the case this year, although the Federal Reserve seems to have temporarily backed off from raising interest rates, which is good for the economy and stocks.

The State of the Global Economy

The statistics for the global economy don't look great thanks to the US-China trade war. This seems to be more of a move to stop China expanding quickly rather than anything else. So, the U.S. government is trying to choke China economically rather than militarily.

The trade war has lead to the Purchasing Managers Index (PMI) to drop in countries around the world.

Trump was trying to increase US exports and reduce Chinese imports, but the opposite is happening and the deficit swelled in December as you can see in the table below.
 

Economic Headlines

• Japan downgrades industrial outlook for first time in 40 months 
• Asia's exports to China plunge as economy stumbles (WSJ) Japan's exports to China in January sank 17.4% on the year, accelerating from December's 7% drop.
• Euro zone February factory growth slammed into reverse - PMI
• Spain factory sentiment hits five-year low on poor export demand 
• Russia GDP Growth Eases to 14-Month Low
• Argentina Economic Activity Falls the Least in Near a Year
• Brazil Business Confidence Deteriorates in February

Global Composite PMI Chart

source: tradingeconomics.com

Global PMI Activity

It doesn't look good for Japan, South Korea, Taiwan, Malaysia, Germany, Italy, Poland, Czech Republic, Turkey & Colombia.

source: https://www.bloomberg.com/graphics/global-pmi-tracker/ 

Hong Kong Growth Just Went into Negative Territory

Doesn't Look Good in the U.S. Either

How to Trade These Markets

The best way to do this is with a rigorous investment trading strategy that assesses risk levels and can hedge your exposure to equities through diversification to safer assets such as treasuries, gold or cash.

You can read more about our investment strategies here.