Stanford Brown claims vindication on 2018 investment calls

1 November 2019

Financial services house Stanford Brown is claiming vindication for the calls it made closing out last year, particularly its reduction in exposures to Australian and global shares.

In a review of markets and portfolios to the end of the September quarter and an outline of portfolio settings for the December quarter, Stanford Brown said that the actions it had taken last year meant that it had experiences a relatively smooth ride through the 2018 turmoil and positioned it to post outstanding returns in the 2019 rebound.

It claimed all the company’s portfolios were ahead of their long-term goals and also ahead of their multi-sector peers in terms of risk-adjusted returns.

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The Stanford Brown analysis said that the September quarter 2019 had represented a continuation of this year’s rebound in global markets after the global growth scare of late 2018 and that markets had rebounded strongly as the US Federal Reserve switched from rate hikes to cuts, ended quantitative tightening and resumed quantitative easing.

It said that before the late 2018 sell-off the company had taken steps to protect client portfolios by significantly reducing exposures to Australian and global shares and had also reduced exposures to small companies and removed emerging market shares because of their capacity to fall more during broad sell-offs.

“After the sell-off, we returned to being over-weight Australian and global shares in 2019 to capitalize on the rebound,” it said. “When increasing global shares we didn’t add back emerging markets (they have lagged badly in the rebound).

“Ordinarily when bullish on global shares we would be more than 50% hedged on the currency risk but we saw further falls in the Australian dollar so we remained below 50% hedged and this added value as the AUD fell further this year. On the defensive side we retained a bias toward Australian bonds over global bonds – as our yields have fallen more than global yields.”

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