Rathbones’ Coombs: “Investors’ greatest risk in 2019 could be investors themselves.”
As market sentiment hits new lows, Rathbones’ David Coombs discusses why he welcomes the recent volatility and continues to back equities.
“There is no doubt that 2018 was a tough year for investors, including us. But we managed to dampen the downside and are now positioned to participate in the upside we see for 2019, because contrary to popular belief, that upside does exist” he says.
Coombs, who manages the £963.93m* Rathbone Multi-Asset Portfolio Funds with Will McIntosh-Whyte, very recently sold his put options at a significant profit - bought in January 2018 – thereby increasing the net equity risk in the portfolios, in the short term.
“We believe now is the time to utilise some of our risk budget. At the slightest whiff of volatility, there can be a tendency to jump ship and make big reductions in risk. But volatility is a friend of the long-term investor, not a foe - it can be present significant opportunity. On that basis alone, it could be argued that the greatest risk facing investors is investors themselves and any wholesale caution. We, for one, are ignoring the noise and are adding to some of our equity positions that have fallen but we continue to see long-term opportunity in and where the investment case remains compelling. For us, we see opportunity to buy these names at the cheaper levels recent volatility has provided and wait for the gain. We are comfortable in utilising our risk budget, but continue to ensure we are doing so in the right places.”
Rathbones’ multi-asset team have also been adding to their technology weightings, despite the battering the sector has received.
“’Tech’ is being needlessly written off in some quarters, but it’s important to focus on the specifics. Take Apple for example, a stock that we do not hold. In our view, Apple has idiosyncratic issues, issues that don’t necessarily translate into other tech names. Our focus is not on tech-related cyclicals but on the disruptors. That differentiator within a huge sector is significant.”
Finally, the team still believe that the US holds the greatest set of opportunities. This is despite commentators weighing up the possibility of a US recession.
“We continue to believe that worries around the US are overdone, for now. The Fed will avoid a recession for the moment, by raising interest rates less aggressively than the market thinks. It’s interesting how the slightest talk of a recession in the US can lead investors into what are sometimes considered more defensive markets, such as Europe, which makes little sense, given that if the US slips into recession, we’re all going down. Incidentally, we not great fans of European equities, especially given the current climate. Instead we prefer long-term structural growth stories in the US. So while growth is unlikely to be above trend, and notwithstanding a devastating Trump blunderbuss, the US still presents better growth prospects than anywhere else.”
*As at 31/12/2018
For more information, please contact:
Intermediary PR (UK/Europe)
Rathbone Unit Trust Management
020 7399 0256
020 7466 5056