Sometimes, it’s easy to get caught up in the risks and “what if’s” of international equity. With so many factors to keep an eye on, it’s just human nature to get a little pessimistic when the tides turn in a way that makes you fear for your portfolio.
At R Squared Capital Management, though, there were a lot of things that made us smile this year. As we approach the Thanksgiving holiday, here are the top things a few of our analysts are thankful for and believe influenced the markets in a positive way in 2017.
Luis Ahn, Partner & Analyst (get to know Luis here):
1. Virtually every market is up for the year, except for Russia (down only 2% in local currency terms). Total return on MSCI ACWI is +21%, while MSCI ex-US is +25%. This compares to S&P’s total return of 17%. Economies are growing nicely—EU GDP growth is tracking 2.5%, the highest since 2011. China and India are tracking 7% for the year, which is lower than recent years, but strong nonetheless.
2. Despite rhetoric pushing it to the brink, the U.S. and North Korea have not waged war. Such an outcome would be catastrophic to the world markets and, more importantly, human lives. Markets are effectively assigning 0 probability of a full-blown war—let’s continue to hope that’s right!
Daeil Cha, Partner & Analyst (get to know Daeil here):
3. Heated housing markets have not burst…yet. Investors have feared housing/property market crashes in areas like Toronto, China, and Australia. Housing crashes in these areas could spark a recession in an already slowing growth environment. Recent regulatory curbs in these markets have helped slow down price gains, but it’s not clear if they will be effective going forward.
Harry Polishook, Partner & Analyst (get to know Harry here):
4. Augmented Reality, for at least giving me one interesting new technology this year, while commoditization remains rampant.
5. Cryptocurrencies, like Bitcoin, for letting me see a bubble grow—and hopefully letting me watch safely from the sidelines.
6. ICO’s initial coin offerings, for letting me see an even bigger disaster begin.
7. President Trump, for making politics and the news interesting.
8. E-Sports, for making me have to once again explain the investment case for virtual magic swords as a revenue driver.
9. The VIX, for giving me a moment of perspective. When all the world seems a bit topsy-turvy, the low VIX at least shows that there’s tons of unworried smart money.
10. My co-workers, for tolerating my tardiness.
Did our international equity investing team forget anything? Tell us what you’re thankful for in the comments section below. Happy Thanksgiving from all of us at R Squared!
As international equity investors, the team at R Squared Capital Management (former team at Julius Baer / Artio Global) utilizes fundamental and macro analysis in our quest to correctly identify structural tailwinds and headwinds at the geographic, sector and company levels.