“It was British World War Two leader, Winston Churchill, who described Russia as ‘a riddle wrapped in a mystery inside an enigma’. He made this memorable statement during a radio broadcast in 1939, acknowledging the difficulty in predicting Russia’s actions,” said a senior private banker in Singapore to Spy this week over Thai food in a restaurant off Orchard Road. “Trump’s strategy on tariffs could be described in exactly the same way,” he added over the third glass of Singha beer. “If he has a cunning plan, it is more elusive than a valid cryptocurrency trading strategy offered to you by a girl you have just met on Tinder.”
BlackRock’s investment strategy team has been looking at the investment opportunities for the next quarter and, happily, does not submit to fashionable gloom: “A final long-term secular trend we see supporting US equities: high drive for innovation. The US is home to some of the largest and most innovative companies in the world. It is at the forefront of the AI infrastructure buildout, and a leader on the global stage in both R&D spending and patent applications. Intellectual property laws serve to stimulate this innovative impulse while offering federal protections for the fruits of those efforts. The US has more than half the world’s ‘unicorn’ companies, private start-ups valued at more than $1bn.” It would seem to Spy that amid the tariff chaos, many have suddenly forgotten what makes the US such a compelling place to invest.
If you are labouring under the impression that globalisation stopped on 20 January 2025 when Trump was elected, Capital Group’s, Steve Watson, a portfolio manager, points out that: “In fact, the tectonic plates of world trade have been shifting for some time. Trade as a percent of world GDP has moved roughly sideways since the global financial crisis between 2007 and 2009.” This trend is fundamentally nearly two decades old (see chart below). He is optimistic that Globalisation 2.0, as he calls it, will herald new opportunities. As he says: “By my count, I’ve lived through more than twenty market shocks in my 37-year career. In hindsight, most of those challenging periods turned out to be attractive entry points for patient investors who remained focused on long-term results.”
Traditional asset managers describe the assets they look after as AUM, that is, assets under management. In the financial advisory world, it might be AUA, assets under advice. Platforms and custodians talk of assets under administration. Goldman Sachs Asset Management’s (GSAM) website states it has $2.8trn “assets under supervision”. AUS, Spy supposes. It conjures up, for Spy anyway, a picture of a teacher with a class of unruly students in detention. If GSAM tells those assets off, will they go and sit in the naughty corner and behave?
Sometimes it feels like you are running hard to stay still. Or in Jupiter’s case, running hard and still dropping back. The British asset manager has just reported results this week. The institutional business gathered £1bn ($1.3bn) in new inflows. Sounds great, except for the fact that those pesky retail investors bailed out £1.5bn, meaning a net £500m down on overall assets. Further volatility in April means net AUM has fallen a little further. Total AUM at the end of March was £44.3bn. When Jupiter bought Merian Global Investors in February 2020, combined assets were £65bn. Ouch.
Alphabet had its results last night and they slightly exceeded expectations. What caught Spy’s eye? The search and productivity giant revealed another $70bn share-buyback plan, the same amount it had in 2024 and 2023. That’s nearly 74% of Alphabet’s $95bn in cash and equivalents as of the end of the quarter. The firm has also become a subscription powerhouse. It now has more than 270 million paid subscriptions to its various products, with YouTube and Google One leading the way. It may not be growing like a weed, but Alphabet is clearly doing something right.
If you have missed gold’s monster rally, doubling since 2022, you may want to look at silver, reckons Spy. Historically, silver rallies have often followed gold, but with a lag. The gold-silver ratio, a closely followed indicator among hard-asset investors, offers an interesting signal. Gold is trading at about 98 times the price of silver. In other words, it takes 98 ounces of silver to buy a single ounce of gold. The long-term average is just 68. Either gold is overvalued, or it is time for silver to play catch up. Spy thinks it is the latter.
Facts that make Spy go,hmm: the Nasdaq has gained more than 2% for three consecutive days. Since 1971, there have been eleven full years that had fewer one day gains of 2% than the Nasdaq has had in the last three days. Is that a dead cat bouncing or true animal spirits roaring back into action?
Spy’s quote of the week comes from Howard Marks, of Oaktree Capital Management fame: “But we also have to bear in mind that deciding not to act isn’t the opposite of acting; it’s an act in itself. The decision to not act – to leave a portfolio unchanged – should be scrutinised as critically as a decision to make changes.” Going to the beach and ignoring the market, is not the same as choosing to do nothing.
Until next week…
