We are pleased to report that the Saunderson House model portfolio proved resilient through a challenging year. In this note, we comment on our asset allocation positioning over 2016 and look at the performance of the model against both peer group and industry comparators. Finally, we provide a brief recap of our investment process.
If we had foreseen this time last year that the British electorate would vote to leave the EU and that Donald Trump would become US President, we would not have expected gains for equity markets and, in truth, we would have been recommending lower allocations to risk assets. However, even as the political world was shaken by unforeseen events, equity markets were stirred into life by developments in foreign exchange markets and an improving economic picture. For sterling
based investors, gains from equities were in part due to the sharp fall in the pound in the wake of the Brexit referendum. This boosted both the value of overseas equity holdings, and the earnings of British multinationals with foreign currency revenues. The election of Donald Trump also proved a positive insofar as investors decided to ignore his many anti-market policies and focus instead on promised tax cuts and fiscal expansion. These provided further justification for gains in developed equity markets, as well as the dollar.
Perhaps of greater importance was that the political dramas masked that the global economy turned a corner in mid-2016 and has since been improving steadily, further validating rising share prices. With equity markets enjoying their best year since 2013, we took the opportunity to lock in profits, aware of the fact that investors would at some point have to confront the less positive sides of both Donald Trump and Brexit.
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