Europe in December

BY WILLEM VINKE

Monthly Fund Commentary
19 Jan 2017

BY WILLEM VINKE

The Fund’s benchmark returned +5.84% in December. NYMEX WTI CRUDE was up 8.66% on the month as there was further positive discussion on production caps and inventory levels.

The US 10year treasury yield increased 6bps to finish the month at 2.44% following further commentary on the Trump election victory and indications for what he is likely to do. Selected other yields declined with the German 10year treasury yield falling 7bps to finish the month at 0.208% and the Swiss 10year treasury yield falling by 6bps to finish the month at -0.187%. The UK 10year gilt yield fell 18bps to finish the month at 1.239% amid ongoing speculation regarding what sort of exit from the EU is planned and which if any parts of the existing relationship would be retained; there was little confirmation from the government. Gold traded down 2.19% to finish at $1147.5 as investors looked towards other assets, notably crude to invest in, with silver trading down 3.53% to finish the month at $15.9278. The Euro weakened over the month against the US$ down 0.68% at 1.0517 and strengthened against sterling, because of the political concerns surrounding the UK’s exit from the EU, up 0.8% to 0.8535.

The Fund underperformed its benchmark by 2.18%* in December. Energy, Consumer Discretionary and Financials were the best performing sectors in the benchmark whilst the worst performing were: Materials, Consumer Staples and Industrials. The Fund’s top performing stocks were: ASR Nederland, Pandora and Fresenius Medical Care and the worst were: Paysafe, Wirecard and UBS.

During the month the Fund exited the position in Paysafe and established new positions in Lloyds, Swedbank & Societe Generale. Paysafe was exited on valuation grounds with the other trades undertaken to rebalance the risk within the portfolio towards higher inflationary and interest rate expectations. The expectations of the change in macro trends have been accelerated by the upcoming change in the US presidential administration.

 

The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the Fund as of 17/01/17 and are based on internal research and modelling.